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UK export growth has slowed significantly and was the worst performing of the largest five EU economies in the last quarter, according to the latest European Export Index by accountants and business advisers BDO LLP.
The latest findings from the quarterly index show that growth of UK exports has fallen for the sixth consecutive quarter. The UK’s Export Growth Index plummeted to 95.6 in Q3 2018 from 97.6 the previous quarter and is creeping closer to the point of contraction, below 95.0.
The index now sits at its lowest level since Q2 2016, when the UK voted to leave the EU, and marks a dramatic fall of 15.8 index points since Q1 2017.
The rising price of UK exports is contributing to this sluggish growth. The UK’s Export Inflation Index – which indicates the rate of year-on-year growth in export prices – has risen from 100.1 to 102.7 this quarter. Uncertainty around Brexit negotiations remains a significant factor in the dampened expectations of UK exporters, and rising prices are causing foreign customers to look elsewhere.
This is typified by increasingly cautious announcements from the UK’s largest export goods industry, car manufacturers. BMW plans to shut its plant for a month after Britain leaves the EU, while Jaguar Land Rover has moved 2,000 employees to a three-day week until Christmas, citing Brexit uncertainty and the sliding sales of diesel-powered cars.
By comparison, European exporters have only experienced a slight cooling in their orders. BDO’s Export Growth Index for the EU fell to 99.7 in the third quarter of this year, down from 99.8 in Q2. European exporters are still expected to suffer from secondary pressures as a result of the growing trade war between the US and China. However, the Export Growth Index has remained near the long-term growth trend this quarter, suggesting that EU export growth remains resilient.
This resilience is in part due to the strong performance of Italian exporters. Italy’s Export Growth Index now sits at 100.2, up from 98.9 the previous quarter, and above the long-term growth trend of 100. Germany also continues to post strong export numbers, growing from 98.9 to 99.4 this quarter.
Commenting on the findings, Peter Hemington, Partner, BDO LLP, said: “UK export growth is on a downwards trajectory and has now hit its lowest level since the UK decided to leave the EU. With party conference season upon us, we need clarity on the shape of Britain’s future trading arrangements so that UK exporters can prepare for the future with confidence.
“A rise in the proportion of British companies which export goods and services is also vital, spurred by meaningful government support and an ambitious industrial strategy which has exporting at its core.”