Free trade is a principle that all Conservatives support. Indeed, a key aspect of “Global Britain” is increased openness to trade. A measure of its success, 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.
As we progress with our enterprise-led inquiry into opportunities for improvement from the upcoming review of the Trade & Cooperation Agreement (TCA) between the UK and the EU, this analysis provides the context for why this trading relationship needs an upgrade.
The UK has long underperformed comparable nations on goods exports. The government is right to prioritise addressing this. In this goods exports update, we show that:
- The growth in the UK’s goods exports continues to lag that of the goods exports of comparable nations.
- The volume of goods exported from the UK is still below pre-pandemic levels, even though inflation is causing the value of goods exports to appear to be growing.
- In nominal own currency values, the EU’s and US’ goods exports in 2022 were 26% and 25% ahead of the levels they reached in 2018 – the last “normal” year according to the Office for National Statistics (ONS) – while the UK’s, excluding precious metals, were only 10% ahead. Hence, the UK’s share of global goods exports is falling. The UK’s goods exports would have needed to be 22% higher in nominal terms in 2022 than in 2018 to match the UK’s inflation over that period.
- Export underperformance is affecting the economy: in GDP per capita, among G7 nations, the UK is the worst performer since Q4 2019.
- While other G7 nations’ real GDP per capita at the end of 2022 was, on average, over 1% above pre-pandemic levels, the UK’s was 2% behind.
- Just the pure gap in the value of exports between that achieved by 10% growth and what would have been achieved by 25% growth since 2018 represents about 2% of the UK’s GDP. The effect of reduced trade intensity on GDP overall is complex and likely greater than this.
- Our enterprise-led inquiry into opportunities for improvement from the upcoming review of the Trade & Cooperation Agreement (TCA) between the UK and the EU provides the opportunity for pragmatic solutions to lead a much-needed upgrade in the relationship.