The British Chambers of Commerce, in partnership with DHL, today (Thursday) publishes its latest Quarterly International Trade Outlook, based on survey and documentation data from UK exporters.
The Outlook shows considerable price pressures amongst exporting businesses – but exporters are absorbing the impact for the moment thanks to stronger sales and orders.
The BCC/DHL Trade Confidence Index, which measures the volume of trade documentation issued by accredited Chambers of Commerce for goods shipments, rose by 2.25% on the quarter, and stands at the third highest level on record.
The survey, based on the responses of over 3,300 exporters, shows that in the manufacturing sector, exporters are enjoying strong sales and orders in foreign markets, and are also reporting improvements in domestic sales and orders.
The results of the survey indicate the price pressure from the cost of raw materials is high across the board for exporters (86% in manufacturing, 42% in services). 68% of exporting manufacturers consider exchange rates as a concern to their business.
Exporters are also more likely to have tried recruiting in the last three months. However, firms across the UK economy are struggling to find the right skills, with 70% of manufacturers and 57% of services firms reporting recruitment difficulties.
The findings suggest that the fall in sterling is increasing price pressure for businesses across the economy, but particularly in manufacturing. However, many of those businesses that export have been able to offset the fall in sterling thanks to timely improvements in sales and orders, both overseas and at home.
Key findings from the report:
• The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, rose by 2.25% on the quarter. The Index now stands at 126.51 – up 4% on Q3 2016 – and stands at the third highest level since records began in 2004
• 44% of exporting manufacturers and 30% of exporting service firms reported increased export sales in Q3. 41% of exporting manufacturers and 26% of exporting service firms reported increased export orders
• 41% of exporting manufacturers reported that domestic sales had increased, and 38% domestic orders increased in Q3 2017
• 39% of exporting manufacturers expect their prices to rise. Of these firms, 86% cited raw materials as a cost pressure
• 68% of exporting manufacturers cite exchange rates as a concern to their business, and 49% in the services sector
• 33% of exporting manufacturers and 31% of exporting services firms view inflation as a concern to their business
Commenting on the findings, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:
“While it’s encouraging to see many exporters reporting improved performance on the back of rising demand in key markets, including the Eurozone, price pressures remain a real cloud on the horizon for UK firms.
“The depreciation of sterling has undoubtedly benefited some firms, but has ratcheted costs up significantly for others. Taken together with higher domestic costs facing businesses, a tipping point may soon be reached for some firms – with consequences for investment, recruitment and trade.
“Many exporters are also being hampered by issues in the domestic business environment, most notably the widening gap between business skills needs and the pool of available labour. Trading businesses in some areas now say that there is a generalised labour shortage in their area, which could put a brake on their overseas activity if it is not addressed. This is a sobering reminder that the focus needs to be on the fundamentals here at home, as well as the high politics of Brexit and global trade policy.”
Ian Wilson, CEO DHL Express UK and Ireland, said:
“Now is an interesting time to be part of the UK’s export industry. Whilst it remains shrouded in uncertainty about what Brexit will look like and the implications for UK businesses large and small, those businesses are demonstrating a defiantly positive export performance.
“The world is now more connected than it ever has been, and this report shows that UK businesses are embracing this connectivity, despite the lack of clarity about what lies ahead. We must ensure that businesses remain able to meet international demand and, in doing so, keep the UK at the forefront of buyers’ minds when shopping cross border.”
The British Chambers of Commerce (BCC), in partnership with DHL, today (Friday) publishes its latest Quarterly International Trade Outlook, which shows that confidence among UK exporters remains strong.
The number of businesses reporting improved export sales increased in the first quarter of 2017. Businesses in both manufacturing and services are also more confident that their turnover and profitability would increase in the coming 12 months.
The BCC/DHL Trade Confidence Index, which measures the volume of trade documentation issued by accredited Chambers of Commerce, rose by 5.5% on the quarter – and is up 9.06% from the same quarter last year – standing at its second highest level on record.
The results show that businesses are continuing to trade despite political uncertainty, however currency fluctuations remain a concern. 52% of manufacturers and 25% of services firms say exchange rates are more of a concern to their business than three months ago.
To maintain momentum, and to help UK firms succeed beyond Brexit, the government should develop an expanded trade mission and fairs programme, help businesses build links with key trade partners and underpin deals, and expand funding for front-line assistance to exporters. Businesses will be looking for the next government to secure frictionless future trade arrangements with the EU, crucial to both importers and exporters, as well as to broker new relationships with emerging markets.
Key findings from the report:
• The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, rose by 5.5% on the quarter. The Index now stands at 126.55 –up 9.06% on Q1 2016 – and is the second highest level since records began in 2004
• The balance of manufacturers reporting improved export sales rose from +16% to +26%. Looking at services, the balance of firms reporting improved export sales rose from +8% to +10%
• The balance of manufacturers reporting improved export orders rose from +13 to +22 in Q4 2016, while in services it fell slightly from +6% to +5%
• Looking at expectations of turnover over the next 12 months, the balance of manufacturers confident of an increase held fairly steady, rising from +43% to +44%. In services this rose by four points from +35% to +39%
• Confidence that profitability would improve rose to +28% for services companies – up from the +21% in Q4 2016. The balance of manufacturers jumped by ten points, from +22% to +32%
Commenting on the findings, Dr Adam Marshall, BCC Director General, said:
“Confidence among exporters is strong, which is a timely reminder that businesses are doing their best to ignore the cacophony of political noise around them and focus on the success of their own operations.
“While confidence among UK exporters is high, rising costs, recruitment difficulties, and concerns around currency fluctuations could temper their growth if allowed to continue unchecked. Alleviating the burden of upfront costs and addressing the skills gap would increase productivity, investment and growth.
“For UK exporters to succeed in the long-term, the next government must deliver not only a Brexit deal which allows for frictionless trade with Europe, but also pragmatic and practical support for businesses looking to develop lasting links with new customers and markets around the world.”
Ian Wilson, CEO DHL Express UK and Ireland, said:
“Despite the many unanswered questions about what a post-Brexit Britain will look like, this latest Quarterly International Trade Outlook demonstrates that UK exporters remain optimistic about what the future holds.
“As a facilitator of international trade, we’ve seen our customers embrace the short term benefits that came with the fall in the value of the pound. However, this report demonstrates that whilst businesses are confident, they are not complacent – with currency fluctuations a lingering concern for exporters. In these uncertain times, there is an even greater imperative to expand the portfolio of markets businesses trade with to help spread the risk across multiple currencies.”
