Sterling volatility major ongoing concern for exporters

Friday 31 August 2018

The British Chambers of Commerce, in partnership with DHL, today (Friday) publishes its latest Quarterly International Trade Outlook, based on survey and documentation data from UK exporters.

The Outlook indicates that many exporters are performing well but economic and political factors are weighing on them.

The survey, of over 2,600 exporters, found that confidence in future operations remains strong, but external economic and political factors are having an impact. The results show 60 per cent of exporting manufacturers were more concerned about exchange rates in the second quarter of the year than in the previous three months. There was also increased concern among 43 per cent of service exporters, highlighting the broad impact of the weakness of the pound.

The findings indicate that price pressures eased slightly on exporters during the second quarter of the year. However, those manufacturers under pressure to raise prices report the cost of raw materials as the leading factor (81%). Service firms believe the cost of raw materials (39%) and other overheads (51%) are the leading sources of cost pressure.

The escalating labour shortage in the UK is also having a serious impact on exporters, with a staggering 69% of recruiting manufacturers struggling to find staff.

Elsewhere, the BCC/DHL Trade Confidence Index, which measures the volume of trade documents issued by accredited Chambers of Commerce for goods shipments, decreased slightly on the quarter (-1.34%), but still stands higher than at the same quarter in the previous year.

In Cambridgeshire documents processed by the Chamber have increased by 7.67 per cent.

The Outlook indicates that many UK exporters are maintaining their competitiveness in foreign markets with healthy sales and order books, but the weakness of the pound is increasing the cost of raw materials imported from abroad. With growing tension around the nature of the future UK-EU trading relationship and escalating trade disputes with key partners such as the US, the government must do all it can to maintain confidence and take unilateral action to improve the domestic business environment wherever possible.

Key findings from the report:

• 39% of exporting manufacturers saw an increase in export orders over the last three months, 30% of exporting service firms report an increase
• 60% of manufacturing exporters are more concerned about exchange rates than three months ago (up from 56% in the previous quarter)
• 26% of manufacturing exporters and 25% of service firm exporters are more concerned about inflation than three months ago
• 35% of exporting manufacturers and 32% of exporting service firms expect the price of their goods/services to increase
• For those manufacturing exporters under pressure to increase prices, 81% report the cost of raw materials as the leading source of pressure
• 77% of exporting manufacturers and 67% of services firms attempted to recruit in the last three months, however, of those, 69% and 60% respectively reported difficulties finding the right staff
• The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, fell by 1.34% on the quarter. The Index now stands at 125.26 – the fifth highest level since records began in 2004.

Commenting on the findings, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: “These are unusual times, and the escalating political and economic turbulence doesn’t go unnoticed by business. It’s been a summer of trade tensions and endless Brexit bickering, and exporters are particularly exposed to the consequences of that turmoil.

“Companies will always find a way to trade with each other, but messy negotiations and the threat of higher tariffs have implications, and can hit confidence and firms’ bottom lines. While many exporters are making the most of their competitive advantage in foreign markets, the fall of sterling also puts considerable pressure on the cost of imports and the volatility can make it difficult to plan.

“The UK government can’t control currency or the actions of trading partners, but it can take steps to mitigate the level of uncertainty at home. Reaching a pragmatic and busin

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