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Cost of living crisis hits UK exporters – UK Export Monitor, Q2 2022

By rotide
Created 18/07/2022 - 17:13
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Research produced today by Coriolis Technologies in partnership with The Institute of Export & International Trade, suggests that the cost-of-living crisis is having a significant impact on exporters.

Analysis of in-house data as well as the recent Office of National Statistics (ONS) figures reveals that over the past year, the nominal value of exports has increased by 20% which is significantly higher than the annual inflation rate, which currently stands at 9%.

Since the start of 2022 there has been clear upward pressure on import prices: the cost of imports has increased by nearly 36% compared to May 2021 despite the volume of shipments to UK ports being 3% lower than they were a year ago.

The data shows that fewer UK companies are exporting, and even fewer goods have been exported but at higher prices over the past six months. The cost of imported goods has increased by over 35%, outweighing the increase in UK exporter values. Our research shows that UK exporters are employing fewer people, and exporter revenue has declined over the past six months. Any increase in the value of UK exports masks incredible upheaval within companies that export goods and services from the UK, putting further strain on the UK export community as prices of raw materials and components increase.

Institute of Export & International Trade Director General, Marco Forgione said: "What is clear from our analysis is this spike in the value of exports relates to cost of living pressures. Although the ONS figures point to a clear rise in the value of exports our data highlights this is against a backdrop of lower overall volumes of exports with fewer businesses now exporting. More worrying is the dramatic increase in the cost of imports against a decline in volumes. These price pressures will continue to feed through to what consumers have to pay. This is a worrying trend we have been tracking for some time now. Exporters need help and support if they are to drive jobs and lead growth in the UK economy."

Coriolis Technologies Chief Executive, Dr. Rebecca Harding said: "We cannot hide from the fact that UK exporters have been under considerable pressure for a while now. This is the message of consecutive Exporter Monitors in the past two years. However, what is now being added to the picture is the cost of living crisis that is the result of supply chain shortages and increases in food and energy prices as a result of the Russia-Ukraine conflict."

The findings in detail:

UK exporters have suffered a decline in both employment and revenues across Q1 and Q2 of 2022. Our unconfirmed figures for Q2 of 2022 suggest that UK exporter revenues have fallen by £150.8m while employment has dropped by almost half a million. Our data suggests that in Q2 revenues have declined by 2.95% and employment by 3.38%, despite the fact that the number of exporting

companies has risen everywhere except for Northern Ireland. This is off the back of a fall of 1.6% in revenues and 1.52% in employment in Q1 - meaning that the UK's declining exporter performance seems to be deteriorating still further.

UK GDP figures from the ONS show a Q1 growth of 0.8%, with Q2 and Q3 growth expected to sit at 0%.This suggests that, while a recession is not yet projected for the economy as a whole in terms of GDP, UK exporters are experiencing accelerating declines in revenues and employment - suggesting that exporter performance is lagging behind the economy as a whole.

However, at the nation-state level, the picture is uneven. In Q1 of 2022, all UK nations saw a decline in exporter revenues and employment - except for Wales, with a 1.46% increase in revenues. In Q2, only England saw negative growth in revenues (-3.16%) and only England and Northern Ireland saw negative growth in employment (-3.64%, -0.13%). Our data shows that Scotland and Wales both saw increases across counts, employment and revenues in Q2. While Wales' growth was less than 1% in employment and revenues, Scotland saw growth of 6.5% in employment and 8% in revenues. However, compared to Q2 of 2021, Scotland shows an overall drop of 15% in employment and revenues and Wales shows a drop of 8% in employment and 9% in revenues. At the UK total, against Q2 of 2021 the number of exporters has declined by 4%, while employment has fallen by 7% and revenues by 5%.

At a sector level, Accommodation and Arts and Entertainment have increased their exporter counts since last quarter,  but have both seen big losses in their employment figures and revenues. However, in comparison to Q2 2021, Accommodation and Arts and Entertainment have increased their employment by 14% and 3% respectively, and the Accommodation sector has also grown its revenue by 12%, suggesting some growing resilience in discretionary spending against the hits taken since the pandemic.

Mining has seen drops across the board since last month by 0.9% in its exporter counts, 36.2% in employment, and 32.1% in revenue. Comparing these huge drops to last year's figures, this is a 2% decrease in exporter counts, a 55% decrease in employment, and a 52% drop in exporter revenues. This is a similar story for Electricity, Gas, and Steam Supply which, despite seeing an increase in exporter counts by 8.9% since last month, its employment has fallen by 8.6% and revenues by 4.4% in the same time period, and it has 14% fewer exporter counts, 9% fewer employees, and 6% less revenue since last year. While this results in a loss for UK exporting numbers, it is a necessary result and indication of the UK fulfilling its obligations to the Paris Agreement of cutting its greenhouse gas emissions by 68% by 2030 and to the Climate Change Act by reaching net zero by 2050.

Against this negative outlook across two consecutive quarters - and against Q2 of last year - the government must install policies to support exporters. According to the ONS, the UK's trade deficit

excluding precious metals expanded to £26bn in Q1. With negative growth for exporters accelerating in Q2, the trade deficit could increase further, which in certain circumstances can lead to higher overall unemployment. This is particularly worrying as the cost of living crisis looks set to worsen.


Source URL:
https://www.newbusiness.co.uk/articles/international-trade/cost-living-crisis-hits-uk-exporters-%E2%80%93-uk-export-monitor-q2-2022