BCC News: What lies ahead – challenges for UK trade in 2023
The challenges facing UK exporters in 2023 are significant and it will take a concerted effort by our global network, working alongside the UK Government, to positively shift the dial.
In 2022, exports increased by 6.7%, once the effect of inflation was removed, but this is still less than the value of goods and services the UK sold overseas in 2018.
There were also warning signs in the data for the last quarter of 2022, with UK exports falling by 2.9% as economic headwinds continued to blow.
For 2022, as a whole, the total annual trade balance in goods and services, excluding precious metals, widened by £85.3 billion to a deficit of £108 billion, when compared with 2021.
The latest BCC data for Q4 of 2022 also paints a stark picture:
- Most Small and Medium Sized Enterprise (SME) exporters reported no improvement to exports, with 27% reporting decreased export sales in the quarter and 47% reporting no change.
- Only 26% of SME exporters saw increased export sales.
- The picture for future orders was even weaker with 28% reporting a decrease against 24% an increase.
With the World Trade Organisation forecasting global trade growth of just 1% in 2023, down from 3% in 2022, then it would appear there is little to cheer.
While China’s reopening should ease production supply chains in the long-term, its suddenness could also add to the volatility, and it may create additional supply chain turbulence - if the Covid pandemic continues to impact its economic output.
But there are some signs of better times ahead. The International Monetary Fund in its World Economic Outlook update in January indicated that global demand may pick up again - particularly in the second half of 2023. GDP growth in China is forecast to be 5.2% in 2023, and 6.1% in India (picking up to 6.8% in 2024).
If consumer spending does pick up in China, and beyond, then there could be the potential for higher export sales carrying on into 2024. Top UK goods exports to China include vehicles, machinery, electrical equipment and pharmaceuticals.
Other export markets which UK firms should be keeping an eye on are the EU, US, Switzerland, Canada, Norway, South Korea and Japan.
But the outlook remains uncertain, and the UK Government must fight the corner of small and medium sized export firms.
Issues on customs processes and checks arising from the Northern Ireland Protocol require speedy, stable, and certain resolution, as it still looms over the UK’s relationship with both the EU and the US.
Outside of the EU, the US is our biggest trading partner, and the one that BCC members tell us they are most interested in. Yet progress on free trade talks is stalled, meaning that other, innovative ways to improve trade relations will be needed.
And as the Good Friday Agreement silver anniversary looms, the UK has a golden opportunity to transform our trading relationship with our two biggest export markets in one fell swoop.
Resolve the outstanding protocol issues and it should have benefits for UK businesses exporting in both east and west directions, as well as for Northern Ireland.
This could also help pave the way to dealing with a further challenge that has reared its head on US trade relations.