Mark Field is the Member of Parliament for the Cities of London and Westminster and currently serves as a member of the Intelligence and Security Committee. Follow Mark on Twitter
fast-changing world, the truth is the global race has been underway for some
time. The past
half-decade ought to have been the best of times for UK exporters. After all,
in the immediate aftermath of the financial crisis, sterling dropped in value by
over 20% against the currencies of both our biggest export markets.
The pound’s fall against the US dollar (nearer 30%) and the Euro in an era before
enforced austerity within the Eurozone happened when consumption remained
crash, our floating currency has remained remarkably stable against
these competitor currencies – the slight gains in 2009-12 only being cancelled
out by downward movement in recent months. Worryingly, however, despite the
devaluation, UK companies appear to have missed this opportunity to boost export
sales, and the UK’s healthy surplus in services exports continues to be undermined
by a stubbornly high goods deficit.
government’s avowed strategy of rebalancing the economy towards trade and
manufacturing, where the UK is currently the eleventh largest goods exporter
worldwide (in 1990, the UK stood proudly in fifth place), and away from
financial and professional services where we rank at number two, is part of the
issue. We might rightly have expected a manufacturing renaissance to compensate
for weaker services exports in the aftermath of the financial crisis. Yet as
the pound was falling after 2008, so were British manufacturing exports – by
some 8%. In expanding, non-EU markets, the export of goods has fallen by over
4% year-on-year, with the much vaunted car industry witnessing a slump of 23%
from its January 2012 peak.
performance in the emerging markets remains weak – indeed, the weakest of any G8
nation for the period 2000-2011, an era in which emerging markets were regarded as
the key route to expansion. The Germans exported nearly twice as much in goods
to India in 2011 as their UK counterparts, while the Belgians similarly continue
to dwarf our own exports to that vast nation. Indeed, when it comes to the
Indian market, Britain is taking a mere 1.5% slice of the cake, and ranks
nineteenth in the 2012 league table of exporters. Given the historical UK-India
ties of Empire and Commonwealth, let alone the benefits of common language and
culture, this is little short of a national disgrace.
Spain and Portugal, whilst under the weight of stiff ECB-sponsored austerity
programmes, have cleansed much of their non-performing business and, in recovery
mode, have put in better export performances than the UK, where our 0.3% decline
indicates a fall in global market share. This applies even in our traditionally
strong market sectors, where the coalition is supposed to have focused the UK’s
rebalancing efforts. In high tech/high value-added manufacturing, our export
record has been disappointing, declining to less than 11% of GDP – two-thirds of
the EU average which we matched less than twenty years ago.
To be fair, both
David Cameron and Boris Johnson have led high profile trade missions to the Indian
sub-continent, in particular, in order to kick-start a fresh wave of trade
deals. The appointment in recent months of eight trade envoys to specific
overseas territories is designed to pay dividends in the future
and the new same-day visa for Indian businessmen, alongside the lifting of
restrictions on Indian students, sends precisely the right message about
Britain being open for business. These envoys,
working closely with UKTI and overseas embassies/High Commissions should regard
their roles not as propagandists for UK companies, but as providing long-term intelligence
about the ‘go-to people’ on the ground in territories for prospective
exporters, especially in the SME sector.
however, the developing world still has an overwhelming appetite for mid-market
manufactured goods, rather than the services that make up the UK’s competitive
advantage. Even in China and India, the most mature of the emerging markets,
demand for services is at a relatively immature stage in the growth curve.
However, we forget at our peril that the cultural propensity of the fast-growing Asian middle class to save means that, before long, they will assuredly
be prime targets for our financial, consulting and professional services
In most other
countries coping with financial crises, the export boost from devaluation has
been the great sweetener, leading those economies back to growth. Take South
Korea, for example – a country whose currency dropped in the aftermath of the
1997 Asian financial crisis to a similar degree as ours post-2008. In its wake came
a 15% increase in manufacturing exports. The mysterious failure of the UK similarly
to capitalise on the back of a weakened pound suggests our problems run deeper
– that we have a productivity issue.
the UK faces a double whammy. On the one hand, the proportion of the overall
population in work continues to decline (not, it should be said, as
precipitately as many of our European neighbours). On the other, we face a huge
challenge in respect of the quality of our labour market. Complacently, the UK
has prided itself on having a highly skilled, inventive and productive
workforce. Yet the functional illiteracy, innumeracy and chaotic lifestyles of
a worryingly high proportion of UK adults have rendered them unfit for the
modern day service industry workplace. Witness the huge numbers of foreigners
employed in hospitality at a time of high indigenous unemployment. Whilst in a
by-gone era many of the unskilled might have found employment in traditional industry,
such jobs have disappeared.
abandonment of the UK’s science and technology edge has resulted in a near-terminal decline in our manufacturing capacity. Nowhere is this more apparent
than in London. In the half century between 1960 and 2010, the capital’s
industrial base contracted precipitously. At the start of this period,
manufacturing accounted for virtually one-third of London’s wealth. It is now
reduced to just 7% – and with it three quarters of industrial jobs have been
lost. Truly, there is no way back.
Chinese companies are able to manufacture mass-market goods more cheaply, but
the lack of UK commitments in enhancing graduate and apprentice level skills in
IT, science and engineering has served ill our chances of expanding exports in
this most perilous of decades. In 2008, China had 3.7 million engineering
students and produced 14 times as many engineers as the UK. If a
half-century ago top UK engineering companies still attracted many of the best
graduates, the decline in the appeal of this discipline (even for those with an
academic and practical training) has been marked. The services industries –
banking, the media, law, management consulting – attracted many more of those
entering the workplace in the 1980s and 1990s, with the even more specialist
financial service outlets of private equity and hedge funds appealing until the
crash of 2008.
Sadly, the UK
probably now lacks the critical mass in technical graduate engineering skills
or a home manufacturing base to recover, even if banking and professional
services were to remain (relatively) in the doldrums for years to come.
Furthermore, Britain’s small and medium sized businesses (SMEs) appear
stubbornly reluctant to export, with only 20% of the UK’s 200 000 SMEs doing so.
UK Trade and
Industry is determinedly trying to address that by helping such firms spot
export opportunities. Other than appointing envoys, SME assistance and the liberalising
of immigration rules, what else can government do to rebuild the UK’s trade
performance? The Export Guarantee initiatives are welcome but invariably take
time to bear fruit. They are the lifeblood for mid-sized enterprises breaking
into new emerging markets. The UK needs
to exploit supply chain finance within the Eurozone and recognise the strengths
of its position as a distribution hub. To be frank, we are well behind the
French and German governments, which are often accused by British prospective
exporters of unfairly promoting their own national exporters in new markets in
Asia, Africa and South America.
Now is not the time for orthodoxy and
timidity in the export guarantee field: we need to integrate policies in this
area, and aggressively market that diminishing but still highly respected UK
expertise at the top end of the value chain in the manufacturing sector.
Inevitably, some export guarantees will go sour, but that is the price that any
government must pay if we are to exploit the new export markets that will
invigorate the UK’s traditional role as a global trading nation in the century
that lies ahead.
Beyond that, however, the UK requires
serious long-term thinking that identifies future growth industries and links
them to new infrastructure projects, targets them for R&D subsidies and
equips the workforce with the skills to operate in the growth areas of
tomorrow. It is
unrealistic to expect a speedy turnaround of our trading fortunes in emerging
markets, but the marketing of UK manufactured goods and services abroad needs
to be reinvigorated before the UK economy can claim an export renaissance. We
still have a great deal to offer, not least as the goods we do manufacture have
a reputation for quality. But our exports needs to be far wider and deeper than
professional services and high-end goods if we are to close the gaping British