By Maximilian Clarke

A strong pound and continued eurozone uncertainty have led to a slowdown in the UK’s export growth, figures from DHL and the British Chambers of Commerce shows.

The third DHL/BCC Trade Confidence Index, a measure of the UK’s exporting health, reveals that growth among UK exporters slowed during the last quarter of 2011. The index, which draws upon a survey of over a thousand exporters and an analysis of export documentation (required of all UK companies exporting goods outside the EU), shows a muted outlook for domestic and international trade activity in 2012.

Trade documentation data for UK goods exports in Q4 2011 shows a 3.7 percent increase on the same quarter last year, demonstrating that growth in export goods continued. Additionally, a third of (34%) respondents stated that their export orders increased in Q4, comparable to 35% in Q2 and Q3 respectively.

“With the latest figures in the report showing a weakening in export orders and indeed overall business confidence, the reluctance from exporters to invest is a concern,” commented Phil Couchman, CEO of DHL Express UK and Ireland. “However, factors such as a flat base rate and government making the UK a leading offshore trading centre for the Renminbi could give UK businesses a competitive advantage.

Despite worsening confidence about the general business situation amid concerns over the slowdown in the world economy, the balance of UK manufacturing firms reporting an increase in their domestic orders saw a marginal swing from -2% in Q3 to +2% in Q4. Furthermore, the balance of manufacturing firms reporting an increase of profitability confidence rose from +32% to +36%.

Export orders
However, overall the survey results also show that firms recorded weaker export orders than export sales, suggesting a slowing of export growth towards the end of the year. A quarter of exporters (25%) have seen a decrease in export orders over the last quarter, compared to 24% in Q3, 22% in Q2, and 12% in Q1.
Inflation remains a huge concern for exporting businesses, but there are signs that some of these pressures are easing. The cost of energy, fuel, and raw materials has contributed to financial pressures on businesses and consumers alike. For manufacturers, the proportion of firms reporting inflation as a concern fell from 42% to 40% (and was a lesser concern than both taxation and exchange rates). However, in the service sector, the proportion of firms reporting inflation as a concern was at its highest since Q1 2010. Additionally, exchange rate concerns have risen to their highest level since Q4 2010, with 37% of respondents reporting that they are more of a concern than the last quarter.

Couchman continued: “There are plenty of success stories out there of fledgling companies beginning to export into foreign markets. An increasing number of UK exporters are seeing flourishing e-commerce sales to the continent and further afield, specifically Australia — as disposable income and favourable exchange rates across the Pacific create inroads for British goods.

“Success though is dependent on support. A lack of business confidence indicates that companies don’t see growth opportunities on the horizon. More needs to be done to change this state of mind amongst businesses.

“With our pre-existing markets struggling, it’s essential that exporters set their sights on new faster-growing trade partners. And now is the time to begin.”

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