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Trade analysis of UK’s top ten manufacturing sectors over 20 years looks to ‘exports of autos, aerospace, beverages, pharma and food products’ for future of Global Britain, says trade report

This report by trade specialist Phil Radford analysing the UK’s top ten manufacturing sectors illustrates that the real value of exports to the EU was lower in 2019 than in 2000 – after adjusting for inflation and extracting the value of precious metals. Neither is this stagnation a Brexit phenomenon. As the report shows, UK manufacturing exports pivoted decisively away from EU markets in the two decades before the UK’s exit from the Customs Union. In contrast, ‘Exports of autos, aerospace, beverages, pharma and food products to non-EU markets have all outpaced the average GDP growth rate of the UK’s non-EU trade partners.’

Critically, this study shows that manufacturing is vital to UK trade. It delivered 88 per cent of UK goods exports in 2000, and 87 per cent two decades later. In global markets, UK manufacturing is already a quiet achiever.

The report offers several trade policy recommendations that may support ‘levelling up’, by identifying industries and subsectors outside London that have already proved competitive in global markets:

  • Autos, tariffs and subsidies: ‘Attracted by huge state subsidies in fellow EU countries, car companies switched production to car plants in the continental EU. The result was a −£29.6 billion deficit in 2019, which is growing steadily.…The new trade agreement with the EU means that this trend will continue unless UK governments do something to stop it.’
  • Pharmaceuticals and tax: ‘… if the UK does not improve on what Ireland did in the early 2000s, then the pharma manufacturing industry will continue to die, and the UK will lose its second largest non-EU manufacturing trade surplus.’
  • Aerospace and unmanned air vehicles (UAVs): ‘To sustain the UK’s position as a top aerospace exporter, the UK should seek global leadership in UAV design and production.’
  • Focus on small enterprises: ‘…small scale entrepreneurialism has demonstrated global competitive advantage in the UK’s aerospace, pharmaceuticals, food and beverages sectors. Consequently, the Smart Award Scheme is likely to find SMEs with the best prospects for increasing UK exports if it focusses attention on these sectors.’
  • Liquid gold: ‘If there’s one reformed trade relationship that could radically boost exports, it’s the UK’s with India. And this is thanks to a single product – whisky.’
  • Premium foods: ‘Though small, the premium end of the UK’s food products sector has a great future on global markets… One way to increase global reach for small food and agri-producers is via a ‘Five to Fifty’ export program.’

Some specific sectors of UK manufacturing are highly competitive in global markets. They are testament, Radford finds, to ‘a spirit of endeavour among the UK’s globally minded manufacturers’. The report also identifies the stark failures in the UK’s manufacturing trade, providing valuable insights into UK trade policy.

The author’s sector-by-sector analysis of UK manufacturing trade shows that:

  • ‘There was no link between the supposed benefits of the Customs Union and Single Market, and the comparative performance of UK manufacturing exports from 2000–2019.’
  • ‘The Customs Union and Single Market delivered zero export growth for UK motor vehicles.’
  • Since 2000, UK motor vehicle manufacturing powered to pole position among UK goods exports: this is solely due to the success of premium marques in global markets.
  • ‘Some UK manufacturing sectors are already highly competitive in global markets. Exports of autos, aerospace, beverages, pharma and food products to non-EU markets have all outpaced the average GDP growth rate of the UK’s non-EU trade partners.’
  • ‘The Customs Union and Single Market worked better on imports than exports.’
  • The imbalance between export and import growth rates in UK–EU trade has created a series of ‘captive markets’ in certain sectors in the UK – and the new UK–EU trade deal could entrench past trends rather than abate them.
  • ‘There is no way that trade in services with the EU can compensate for the UK’s entrenched deficits in manufacturing trade, even if exports of services continued on pre-departure terms.’
  • ‘Since 2000, UK exporters have turned away from the EU and found growth in global markets. UK exporters have performed far better in global markets trading on WTO rules than in the EU within the Customs Union.’
  • ‘Small companies are powering export growth in some of the UK’s best performing sectors.’

It finds that there is no connection between the apparent benefits of seamless, tariff-free trade with the EU, and the actual export performance of UK manufacturing sectors.

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