By Marcus Leach
A new measure of the UK’s exporting health, the DHL/BCC Trade Confidence Index, reveals that UK exporters are showing signs of strength.
However, difficult global economic conditions are creating challenges that affect exporters’ investment decisions, and their desire to take on staff.
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), suggests that orders and confidence among exporters remain robust:
· Trade documentation data in Q2 2011 shows a 3.6% increase on the same quarter last year (and is at the second highest level since Q3 2008), suggesting that companies’ export sales continue to grow.
· The balance of exporters that believed their turnover and profitability would improve over the next twelve months improved in Q2 2011. Firms’ confidence in increasing turnover rose from +41% to +46%, and their confidence in increasing profitability rose from +17% to +28%.
Yet continued uncertainty around the resolution of the Eurozone debt crisis, and the fragility of the UK’s economic recovery means British exporters are reticent to invest and take on more staff:
· Exporters’ intentions to invest in plant and machinery have recovered slightly since the recession, but they still remain weak by long-term standards (+9%). Exporting businesses exhibit less confidence to invest now than they did in the first three months of 2008, immediately prior to the recession.
· Similarly, exporting firms’ plans to take on more staff in the next quarter are anaemic, highlighting the fragility of the recovery. In manufacturing the balance is +4% and in services +13%.
The index also reveals regional differences, with the number of export documents for goods issued in London, South East and North West running far ahead of many other regions, including the North East of England, Northern Ireland and Wales.
Commenting on the results of the index, David Frost, Director General of the British Chambers of Commerce, said: “There is a disconnect between the strong performance of exporting firms and their lack of confidence when it comes to investing and creating jobs. An uncertain economic outlook, with concerns surrounding Eurozone debt and a fragile UK recovery, means many businesses are holding back on investment decisions - despite seeing strong export sales and orders in recent months. Cashflow is still a real problem for exporters, particularly smaller firms, and the results show that there are regions of the UK that lag behind when it comes to exporting outside the EU.
“The UK’s economic recovery relies on exporting and investment. Government must help British business to have the confidence to export and invest — and ensure that support schemes designed to help new and growing exporters are easy to access and easy to understand.”
Phil Couchman, CEO of DHL Express UK and Ireland said: “The UK’s economic recovery relies on exporting and investment, specifically from small to medium sized businesses. As the lifeblood of the British economy, the reluctance from exporters to invest is a concern. We need to shore up confidence within this community and ensure they are supported in tapping into the purchasing power of other markets.
“It is encouraging though to see an expectation for growth among UK exporters, albeit a conservative figure. It shows that these businesses are taking steps to drive the recovery and out-perform the recession, with indicators suggesting that they are confident of improving turnover and profitability over the next 12 months.
“With businesses now increasingly operating online as well as on the high street, customers from all over the world have access to their services and goods at the click of a button. This places businesses under increasing pressure to globalise their operations, so it is vital that that they are adequately supported. A thriving exporting industry is key to help bring the country’s books back to black and securely place Britain on the trade map.”
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