Volatility and price pressures weighing on UK exporters

Friday 15 February 2019

The percentage of both manufacturing and services exporters who are expecting to increase their prices has risen in the past three months, as international traders struggle with the value of the pound and pressure from the cost of raw materials and other overheads, according to the latest Quarterly International Trade Outlook from the British Chambers of Commerce, in partnership with DHL.

The report, based on a survey of over 2,600 exporters, and export documentation data, shows that nearly half (49%) of manufacturers and 39 per cent of services companies plan to raise their prices, up from 41 per cent and 34 per cent respectively.

Exchange rates continues to weigh heavily on the minds of businesses, with 69 per cent of manufacturers citing it as a source of concern. Weaker sterling is also pushing the cost of raw materials up for exporters, with 84 per cent saying that they are a source of pressure driving prices. For services, other overheads such as office rents is the leading source of price pressure (59%).

Elsewhere, the BCC/DHL Trade Confidence Index, which measures the volume of trade documents issued by Accredited Chamber of Commerce for goods shipments outside the EU rose by 4.06 per cent on the quarter, and stood 1.03 per cent higher than in the same time last year.

Despite these issues, however, many exporters remain bullish – 57 per cent of both manufacturing and services exporters say that their turnover will improve in the next 12 months.

The survey results indicate the impact of Brexit uncertainty and wider global trade trends but also highlight issues in the domestic environment that are barriers to growth for UK exporters. With the UK’s departure from the EU becoming a vacuum for all of government’s resources and attention, the growing skills shortages show no sign of abating. The majority of recruiting businesses in both sectors struggled to find the skills they needed in the last quarter.

The leading business group is calling for an end to the Brexit logjam that has prevented parliament from finding consensus on the way forward and consumed all of Westminster’s attention. Government must provide long-awaited clarity on future trading conditions and then refocus on the fundamentals of the domestic economy to boost stability and confidence.

Hannah Essex, Co-executive director of policy at the British Chambers of Commerce, said: “These are uneasy time for many exporters concerned by persistent uncertainty around Brexit and future terms of trade with key partners. As we approach 29 March, so many questions remain unanswered and with the unwanted possibility of no deal still looming, businesses are preparing the possibility of increased volatility.

“At a time when all of the cogs of government seem to be jammed by Brexit, issues crucial to the UK’s competitiveness and productivity have gone ignored. Business communities continue to shout about the scale of labour shortages, with four-in-five manufacturers reporting recruitment difficulties. Yet there has been little action relating to improvements in the UK’s training or skills system, nor has the government’s immigration blueprint delivered on calls for a system to provide easy access to skills at all levels.

“The government must urgently deliver clarity on the UK’s future after March 2019, and then immediately refocus on the fundamentals of the domestic environment. Removing barriers to growth at home is more important than ever at a time of such uncertainty and transition for our business communities.”

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