Re-routing UK trade
- 12 April 2012
- From the section Business
Today's trade figures show David Cameron has a battle on his hands boosting Britain's exports. But he's gone to the right part of the world to do it.
In the Budget last month, George Osborne again cited his favourite trade statistic - that the UK exports more to the Republic of Ireland than to all of the Brics countries (Brazil, Russia, India, China and South Africa) combined. In fact, as I tweeted at the time, that's not true. It hasn't been true for a while.
In 2011, 8.7% of UK exports went to the Brics, compared with 6% to Ireland. The share going to the Brics was also slightly higher in 2010. But Ireland did take a larger share in 2009: 7% compared with 6.6% for the Brics.
Those were the figures available when Mr Osborne first highlighted that number, on an early trip to India.
It's good news that our exports to India, China and others have been rising since then (less good that our exports to Ireland have fallen off a cliff).
But the new trade figures underscore how much more needs to be done if we want to catch up with the likes of Germany and count on those markets for a significant part of our growth. Economists at Citi reckon that Britain has the lowest share of exports going to the Brics in the European Union.
The data show the trade deficit widened again in February, to £8.8bn. That's the largest gap between our exports and imports since September. The deficit in January has also been revised up.
What's disappointing is that it's exports driving the deterioration - the value of our sales to other countries fell by 3.4% between January and February, while our imports from the rest of the world were broadly stable.
And, most surprising, it's exports from outside the European Union that have dropped, by nearly 9%. Exports to countries in the eurozone actually rose in February, by more than 3%.
Does this mean that the government is talking nonsense when it says the eurozone crisis is hurting the recovery? Not necessarily.
For one thing, the monthly figures jump about enormously. If you look at the average of the past three months, exports to non-European countries have risen by 2.7%, while exports to the eurozone have fallen by 1.2%.
Looking at trade with individual countries, you can see our exports to the crisis economies have been hit hard. Our exports to Spain, Portugal and Italy have all fallen by well over 10% in the past 12 months. Our exports to Greece are down by nearly a quarter.
But, as you know, other parts of the eurozone, notably Germany, are doing much better. And so are other EU countries, like Sweden, not inside the euro.
Thanks to them, our trade with the European Union as a whole has been holding up, though the last few months have shown signs of weakness, even there.
It's dangerous, and almost certainly fruitless, to dwell on one month's trade statistics - or even three. The fall in exports to America and China at the start of the year could well turn out to be a blip.
And Britain's trade numbers get revised so often, and so dramatically, that Sir Mervyn King, for one, has said he doesn't take them seriously until they are at least a year old.
Still, these are not statistics you would want to see if you were pinning most of your hopes for a decent UK recovery on exports.
They do suggest that David Cameron is right to be piling on the air miles in Asia this week. Though, when it comes to export destinations, it will surely be a while before Burma makes it to the top ten.