In the face of modern global economic challenges and opportunities, the UK government is attempting to drive transformative growth in service and goods exports. Their 2021 export strategy contained an ambitious goal to achieve £1 trillion in exports by 2030. A goal which has been regularly repeated in the corridors of Westminster and trade organisations ever since.
ONS figures suggest only 1 in 10 UK businesses actually export, so there is plenty of room for growth. Goods and service exports totalled £851.6bn in the 12 months to June 2023. Meaning a 17.4% growth is required in less than 7 years.
“In the UK, we got a bit of a history that we are lagging and underweight on our exports to what it should be as a share of GDP.”
Kunal Khatri, UK’s Deputy HM Trade Commissioner for North America.
With a flat target, which doesn’t take inflation into account, critics have argued this is a flawed metric for judging success. A more appropriate target would be to increase the total volume of exports. It certainly could be argued that the inflationary levels seen across the UK for the last 12 months has made this target considerably easier. Goods are dramatically more expensive for local and international consumers now, meaning the UK doesn’t need to sell as much to hit the target.
However, businesses are citing the inflationary pressure as a prime reason for struggling to export, limiting their access to finance to facilitate it. Along with a skills gap being felt in many industries and a gloomy economic picture internationally.
So, against this backdrop, how can the UK ensure it reaches £1 trillion in exports by 2030?
Strategies to help drive growth in UK exports.
1. More free trade agreements between the UK and significant trading partners
The UK has successfully negotiated free trade agreements (FTAs) with a range of partners in recent years, including Australia, New Zealand, the CPTPP and more. There are also ongoing negotiations with the likes of Mexico, India and the Gulf Cooperation Council.
Obviously, the benefits of these agreements are removal of tariffs and a reduction in trade barriers, which helps to facilitate trade. However, if these are going to have meaningful impact on the UK’s goal of £1 trillion export value, they need to be signed with significant trading partners today. Not countries forecasted for growth in the coming 20 years.
For example, Israel represents only £3.8bn in exports a year. The UK’s 38th largest trading partner and only 0.4% of international trade. It’s hard to see how an FTA is going to have immediate transformative impacts on UK exports before 2030. Businesses need more immediate results.
The USA would be a more pertinent target; however the current administration isn’t negotiating FTAs with any international partner. But you can learn more about how to take advantage of the US market and the current trading conditions, in our podcast with the UK’s Deputy HM Trade Commissioner for North America, Kunal Khatri.
2. Look to Asia for export markets.
Asia is a culturally diverse continent, home to over 50% of the world’s population and forecasted to continue an exceptional growth trajectory over the next 20 years at least. By 2030, the region is expected to have nearly 3.5 billion middle class people, compared with 2 billion in 2020. More than the other continents combined.
For UK businesses, this means it’s time to look for the first time at the opportunities this region presents or expanding your current portfolio there. Advanced manufacturing and green technology are two industries expected to really benefit from this profound growth across many developing economies.
With growth in major Western economies stuttering, the Asian market could be where your business expansion and security lies. Furthermore, backhaul shipping routes towards Asian markets are considerably cheaper than import routes, bringing costs and risk down.
The UK’s ascension to the CPTPP is a significant development here. It’s 11 other member states are expected to generate a collective $6 trillion in import demand by 2030, something UK firms must look to take advantage of. Learn more about what this means for UK businesses in our podcast episode. Alternatively, read our blog on it here.
3. Seek expert guidance.
Whether you are an established exporter, or looking to export for the first time, there is endless guidance and support available.
Reach out to logistics solution providers. Reputable ones should be able to provide you with news, market insights and entry advice. They should have a detailed understanding of key trade lanes and be able to optimise the logistics of any export portfolio, bringing costs and risks down. We certainly would.
Alternatively, the Department for Business and Trade have export advisors who can help businesses of all sizes grow internationally. You can find your local trade office and begin using their support.
Beyond that, you don’t have to look far on Google to find economic reports direct from the government or trade organisations. It has never been easier to find accurate information on a particular market. You can do endless groundwork before deciding where to target. A step which can sizeably lower the risk and chances of a mistake.
It’s also worth talking to others in your industry at trade shows and meetings. People are generally forthcoming with help and information to guide your export journey. Even competitors.
4. Increased digitalisation.
Further embracing the modern age and digitalising more business processes is an effective technique for boosting your international exports, primarily because it speeds things up and lowest costs.
The recently passed Electronic Trade Documents Bill, is an important development. Bringing electronic trade documents onto an equal legal standing as their paper equivalents. In their 2023 Trade Manifesto, the British Chambers of Commerce estimates that 51% of UK exports are processed digitally currently, so there’s plenty of room for improvement.
Another technique for boosting trade through digitalisation involves increasing investment in digital marketing. Developing your website to greater its international appeal and backing that up with targeted PPC and SEO campaigns.
“We looked to internationalise the business. So, changing into a .com website, changed to a +44 number. Making sure that people felt like it was a bigger company.”
Derek Carr, Managing Director, Addfield. Who have gone from 0 to 140+ export destinations in 11 years.
Think about all your business’ processes and how increased digitalisation could cut costs and boost competitiveness internationally.
5. Improved access to trade finance.
Trade finance is undoubtedly one of the greatest facilitators of international trade. The long wait between purchasing from suppliers and receiving payment from an international customer can cause significant cashflow problems. Consequently, poor access to trade finance is a great barrier for firms to expand internationally. Particularly for SME’s and medium-sized enterprises.
The government could expand its financial support for firms who present a compelling case for international growth. Currently, acquiring trade finance is extremely complicated and only available to well-established firms with assets and a trading history. Interest payments are often costly too. Removing some of these barriers will undoubtedly have positive exporting consequences.
6. Explore sustainability as a unique selling point.
Investment in clean energy is expected to be roughly $1.7 trillion in 2023, with considerably less, around $1 trillion, going in the direction of fossil fuels. A gap which is widening every year and emphasises the global trend in the direction of sustainability.
The UK leads the way on sustainable development across so many key industries. Have you made progress on environmental impact as a business in recent years? Consider the sustainability credentials of your goods and whether that can act as a unique selling point in an international market.
Decarbonisation legislation continues to be rolled out worldwide. Governments are under pressure to reduce emissions and environmental impact; consumers are increasingly climate conscious. All of this represents an outstanding opportunity for businesses.
We recently produced a case study on our client Oxford Plastics, who have placed sustainability at the heart of their product and have seen exports to the USA increase from £200,000 to £5,000,000 in 5 years. Learn how they did it.
With so many developing economies, the UK must work hard to remain competitive internationally and see the desired export growth hit £1 trillion by 2030. But with the development of other economies comes opportunity. This audacious goal is within reach, provided the UK continues to chart a strategic course, with a strong commitment to liberalising trade, innovation, sustainability, and global engagement.
