The UK is set to miss the government’s target of hitting £1 trillion worth of exports by 2020 by 14 years, the British Chambers of Commerce has warned. The findings come from its annual International Trade Survey, gathered from nearly 2,500 businesses.
While the overall UK trade deficit in 2014 stood at £34bn, the services sector saw its highest ever trade surplus at £86bn - equivalent to 5% of GDP.
Despite the record-breaking trade surplus, the sector has much more untapped potential. The BCC survey revealed that only 23% of services firms currently export, and a further 17% have either previously traded internationally or are looking to do so in the next two years. By comparison, 53% of manufacturers surveyed currently export their goods, and an additional 13% have done so previously or plan to do so again.
In 2012, the Prime Minister announced a target for UK firms to double exports to £1 trillion by 2020, to reverse the country's historic trade deficit. However, the latest data show that if we continue at current growth rates we are not likely to reach this target until 2034.
The UK currently ranks as the second largest exporter of services in the world behind the US, but the BCC survey highlighted the need for government action to open up markets, and the need for UK businesses to increase the skills range of their workforce in order to be competitive internationally. The greatest barriers to exporting among services firms were differences in regulations and standards (27%) and language or cultural differences (26%).
While Europe has traditionally been one of the UK's most important export markets, services firms are increasingly trading successfully further afield. In 2014, the value of the UK's trade surplus in services to non-EU countries was £70bn, compared with a £16bn trade surplus with the EU.
John Longworth, Director General of the British Chambers of Commerce, said:
“The services sector is regularly overshadowed by manufacturers in the media and public imagination, despite the fact that we are one of the world’s leading exporters of financial and professional services. The low proportion of these firms actively exporting highlights the enormous untapped potential UK services firms hold.
"For some time we've been saying that we need a radical change in how we support export businesses. That we are set to miss the export target by 14 years tells us that the radical shift needed has not happened. We cannot continue doing the same things, yet dream of different results.
"For our part, the BCC will continue to grow our global network, providing practical support to UK businesses of all shapes and sizes around the world.
"The government must take these figures seriously and help exporters to catch up. Our businesses have the potential to meet the target. They need ongoing support and access to finance to help them thrive on the world stage."
The BCC's survey also helped to identify ten export 'hot spots' for services - the countries UK services firms are most interested in exporting to over the next five years. The list is led by traditional favourites, the US (32%), Germany (30%) and France (29%), but included China (24%) and the United Arab Emirates (24%) close behind.