Business

Exports could give economy £20bn lift, says CBI report

Containers at Tilbury Dock
Image caption The CBI wants to see a quarter of the UK's small businesses exporting by 2020

The government should reorientate the UK economy towards exports, which could add £20bn to the UK economy by 2020, business group the CBI has said.

It urged the UK to combat the UK's "lacklustre" trading performance.

The CBI wants Britain to match the EU average of one in four small-to-medium-sized enterprises exporting by 2020.

Director general John Cridland said access to finance to aid exports needed to be made easier, especially for medium-sized and small firms.

The government said increasing exports was "a challenge for all of us".

The report - written with the help of Ernst & Young - comes ahead of the CBI's annual conference, in which exports will be a major theme.

The government should aim to increase net exports from -2.4% in 2010 to 2.5% by 2016, the report said.

The CBI wants exports to rise from 29% of the UK's GDP last year to 36% by 2016.

Small and medium-sized enterprises (SMEs) have some of the most growth potential, it said - so therefore It urged the UK to aim to match the EU average of one in four small to medium-sized enterprises exporting by 2020, compared with the current one in five.

Sectors with high export growth potential are construction services, communication services, electrical goods, optical and high-tech goods, creative industries, and financial services.

Emerging markets

UK exporters have failed to exploit the full potential of the "BRIC" nations of Brazil, Russia, India and China, plus many other emerging markets such as Indonesia, Mexico, South Korea and Turkey, the report said.

John Cridland, CBI director general, said: "The UK has a proud history as a great trading nation, but in recent years our performance has been lacklustre.

"Export success will be one of the key drivers of growth, but for too long we have been over-dependent on advanced economies for our trade.

"The continued crisis in the eurozone underlines just how important it is for the UK to diversify its export efforts to high-growth countries.

"The new middle classes in emerging economies will have needs that our niche, high-end producers are more than able to fulfil," Mr Cridland said.

The CBI chief is an admirer of Germany's Mittelstand, the country's economic backbone of medium-sized businesses which have pursued export markets aggressively.

The UK's share of global exports has fallen over the last decade, from 5.3% in 2000 to 4.1% in 2010. During this period Germany's share increased from 8.9% to 9.3%.

'Gazelles'

The UK's largest export market is the United States, at 17% of the total, followed by countries in Western Europe.

The BRIC countries account for only 4% of UK exports, but a focused strategy could take this to more than 11% in value terms by 2020, the report said.

If the sectors identified as having good growth potential step up export activity, then GDP could be boosted by 1.5%, or £20bn, by 2020, it said.

But to achieve this, it would be essential for the business community and the government's export department, UK Trade & Investment (UKTI), to work more closely together, something that has not always been done successfully.

Mr Cridland said: "Too often businesses are finding that the government's public rhetoric does not match with the reality of their experience on the ground, so we're calling on the government to set out a credible exports strategy with achievable performance targets.

"UKTI appears to have a 'marmite effect' among businesses and it must become more commercially focused in its activity.

Some of the UK's mid-sized companies, "the gazelles", had the most potential to export and grow, he said.

One positive sign, the report says, is that the UK is a net services exporter, with an average annual growth of 4.6% since 2000.

Services are likely to be in even more demand in the future as living standards in developing economies rise.

In the coming decade, consumer spending growth in the BRICs is expected to average 13.5% per year, Mr Cridland said.

Minister for trade and investment Lord Green said: ""The report by CBI and Ernst & Young is broadly welcomed.

"We have a national challenge to increase exports. This is a challenge for all of us - for government, for business and for business organisations.

"Trade has been a drag on growth for far too long. We need more companies to start selling overseas and moving out of their comfort zones into high-growth markets."

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