• Export orders increase, although growth has slowed
• Exporters less confident about 2012 prospects, but muted expansion is expected
• Manufacturing industry sees some positive signs from exporting despite previously reported figures showing a 0.9%* decline in Q4 2011
• Exchange rate concerns rise to their highest level since Q4 2010
The third DHL/BCC Trade Confidence Index, a measure of the UK’s exporting health, reveals that growth among UK exporters slowed during the last quarter of 2011. The index, which draws upon a survey of over a thousand exporters and an analysis of export documentation (required of all UK companies exporting goods outside the EU), shows a muted outlook for domestic and international trade activity in 2012.
Trade documentation data for UK goods exports in Q4 2011 shows a 3.7 percent increase on the same quarter last year, demonstrating that growth in export goods continued. Additionally, a third of (34%) respondents stated that their export orders increased in Q4, comparable to 35% in Q2 and Q3 respectively.
Despite worsening confidence about the general business situation amid concerns over the slowdown in the world economy, the balance of UK manufacturing firms reporting an increase in their domestic orders saw a marginal swing from -2% in Q3 to +2% in Q4. Furthermore, the balance of manufacturing firms reporting an increase of profitability confidence rose from +32% to +36%.
However, overall the survey results also show that firms recorded weaker export orders than export sales, suggesting a slowing of export growth towards the end of the year. A quarter of exporters (25%) have seen a decrease in export orders over the last quarter, compared to 24% in Q3, 22% in Q2, and 12% in Q1.
With slowing export orders and sales, many exporters feel less confident in increasing revenue and profitability, and are therefore delaying decisions to invest and take on more staff.
• Confidence: The percentage of exporters confident of increasing their profitability has steadily fallen during 2011. In Q2 2011, 50% of firms felt confident of increasing profitability, but this falls to 48% in Q3, and 43% in Q4.
• Investment: Investment: More than a quarter of exporters (28%) are looking to increase their investment in plant and machinery. The balance of firms looking to increase investment in training rose from +8% to +12% - largely due to the intentions of large firms with over 250 employees to invest in training for staff.
• Job creation: British exporters’ plans to take on more staff in the next quarter are subdued. Only a fifth (20%) of firms expect to take on new staff in the next three months. However, the balance of micro SMEs (businesses of 0-9 staff) planning to increase employment has risen slightly from +9% to +10%.
Inflation remains a huge concern for exporting businesses, but there are signs that some of these pressures are easing. The cost of energy, fuel, and raw materials has contributed to financial pressures on businesses and consumers alike. For manufacturers, the proportion of firms reporting inflation as a concern fell from 42% to 40% (and was a lesser concern than both taxation and exchange rates). However, in the service sector, the proportion of firms reporting inflation as a concern was at its highest since Q1 2010. Additionally, exchange rate concerns have risen to their highest level since Q4 2010, with 37% of respondents reporting that they are more of a concern than the last quarter.
Commenting on the results of the index, John Longworth, Director General of the British Chambers of Commerce, said:
“The latest DHL/BCC Trade Confidence Index shows that the increase in export orders seen after the recession continues, but the pace of this growth has slowed for the fourth quarter in a row. As problems in the eurozone rumble on, and sterling remains strong, our exporters are facing a challenging trading environment. Falling confidence means many exporters are delaying decisions to invest and take on staff, affecting the UK’s economic prospects and the move towards the ‘rebalancing’ we need to see.”
“Companies across the country are exporting innovative, best of British products and services, but we want to see thousands more take the plunge and start selling overseas. Trading with new markets can be a daunting prospect, and that’s why businesses need more support from the government. Chambers of commerce help thousands of businesses take the first steps to exporting, but many tell us they need more help from government in areas like trade promotion and finance.
“We need to create an exporting culture by helping our businesses take to new markets on trade missions, and other promotional activity. But it starts earlier than this, we need exporting to be in our business DNA - that means teaching business students and entrepreneurs the basics. The recovery will be longer and more hard fought than many first realised, but Britain has the talent, the energy, and the enterprise to make its way in the world. All we need is an environment that puts business first.”
Phil Couchman, CEO of DHL Express UK and Ireland said:
“With the latest figures in the report showing a weakening in export orders and indeed overall business confidence, the reluctance from exporters to invest is a concern. However, factors such as a flat base rate and government making the UK a leading offshore trading centre for the Renminbi could give UK businesses a competitive advantage.
“There are plenty of success stories out there of fledgling companies beginning to export into foreign markets. An increasing number of UK exporters are seeing flourishing e-commerce sales to the continent and further afield, specifically Australia – as disposable income and favourable exchange rates across the Pacific create inroads for British goods.
“Success though is dependent on support. A lack of business confidence indicates that companies don’t see growth opportunities on the horizon. More needs to be done to change this state of mind amongst businesses.
“With our pre-existing markets struggling, it’s essential that exporters set their sights on new faster-growing trade partners. And now is the time to begin.”