After a decade of underperformance UK exports will enjoy a period of robust growth, driven by a re-orientation of exports towards the BRIC countries (Brazil, Russia, India and China) and an improvement in competitiveness brought about by a weak pound, says the report The outlook for UK exports.
Andrew Goodwin, senior economic advisor to the Ernst & Young Item Club – the only non-governmental economic forecasting group to use the HM Treasury model of the UK economy – said the UK needed to close the productivity gap with Germany.
"The UK needs to be looking to the lessons learned from Germany, which has consistently achieved greater improvements in competitiveness than the UK, if it is to become a major player in export markets over the longer term," Goodwin said.
This was a long-term process, achievable only through structural reform of the education system and improving incentives to firms to invest in research and development, he added.
The report comes a week after pharmaceutical giant Pfizer announced it was to close a state-of-the-art research and development site in Kent – its largest research site in Europe – with the loss of some 2,400 jobs.
The total value of UK goods and services exports will increase by 8.5% a year over the next 10 years, with the total value of UK goods and services into the BRIC countries to increase by 11.7% a year to 2020, says the report. Just 5% of UK exports currently go to the BRIC economies.
While cash strapped consumers in the UK continue to feel the impact of tax increases, austerity measures and depressed wage rises, strong economic growth in the BRIC economies will see the average household income rise by 14% a year to 2020. Improving living standards and the rapid expansion of the middle class in the BRICs, will also deliver a significant increase in consumer demand for electrical goods and high tech products – traditional strongholds for UK exporters.
The top performers by sector, based on annual growth, are electrical goods (11.6%), optical and high-tech goods (10.4%) and minerals & metals (9%). Service sector exports, particularly financial services, will continue be key to UK export performance over the next 10 years.
"We’re not going to see a dramatic shift in the type of products or services the UK exports over the next 10 years. Our existing specialisms in financial services and high tech products are where we have the skills, labour and the biggest competitive advantage," Goodwin remarked.
