Free trade is a principle that all Conservatives support. When unencumbered by tariffs and non-tariff barriers (NTBs) at and behind the border, businesses can more easily sell their goods and services across borders. This allows nations to sell goods and services in which they are advantaged while importing those at which they are less skilled. Through this free exchange, specialisation increases productivity and therefore improves output and living standards.
Indeed, a key aspect of “Global Britain” is increased openness to trade: the purpose of the UK’s independent trade policy is to maximise opportunities for UK businesses to trade with non-EU markets.
The measure of success of that policy, therefore, is the extent to which UK trade in goods and services is growing. The trade working group of the Conservative European Forum (CEF) aims to track that performance and provide a clearer understanding of the factors driving it.
Readers may have read that the value of the UK’s goods exports have reached record levels. They may also be aware of academic studies claiming that the UK’s exports have underperformed.
We illustrate how these claims can be true at the same time.
We further provide an at-a-glance view of the growth of the UK’s goods exports compared to the growth of those of peer nations.
- Following the falls seen in 2021, the UK’s goods exports are growing, but their growth is lagging that of peer nations’ goods exports.
- The UK’s goods exports reached a record monthly level at current market prices only in May 2022.
- Adjusted for inflation, however, UK goods exports have yet to recover pre-pandemic levels, while those of comparable nations have long since surged past those levels. This implies:
- That the volume of goods exported remains below pre-pandemic levels;
- That the UK’s share of global goods exports is well below pre-pandemic levels and falling.
- The UK’s merchandise exports at current prices in April 2022 were 6% ahead of the level from January 2018, the last “normal” year according to the Office for National Statistics (ONS). However, the EU’s were 28% ahead and the US’ 30% ahead. The UK’s goods exports overall in Q1 2022 were 1% ahead of Q1 2018 levels while the EU’s and US’ were both 18% ahead.
- A thorough comparison of the performance of services exports will be possible only with more quarters of UK and peer country data.
- It is still to be seen whether new independent free trade agreements (FTAs) can put the UK’s trade performance back on track.
- A constrained ability to export brings economic costs both directly through loss of exports and indirectly through lost business investment resulting from the relative unattractiveness of the UK as an export platform.