Quarterly International Trade Outlook

The BCC Quarterly International Trade Outlook sets out the opportunities and risks facing British companies as they trade with the world - with a particular focus on timely information on dynamic new markets.

Quarterly International Trade Outlook – Quarter 4 2019

Exporters continued to tread water through the final quarter of 2019 according to the largest independent survey of UK firms, released by British Chambers of Commerce and DHL Express.

The Quarterly International Trade Outlook – Quarter  4 2019

Quarterly International Trade Outlook – Quarter 3 2019

The Quarterly International Trade Outlook for Q3 2019, released by British Chambers of Commerce and DHL today, reveals that indicators for exporting manufacturers in Q3 2019 have undergone large declines, with several key indicators for orders and cashflow now in negative territory.

The percentage balance of exporting manufacturers reporting an increase in export orders fell to –1 per cent, down from +9 in the previous quarter. The balance of those reporting increased domestic orders fell to -4 per cent in Q3, down from +8 per cent in Q2.

The balance of exporting manufacturers reporting improved cash flow stood at -5 per cent in Q3, down from +6 per cent in Q2. In Q3 2018, one year ago, the balance stood at +13.

While exporting manufacturers saw large declines across the QITO indicators, the exporting services sector also saw indicators well below historical levels. In Q3 +8 per cent of exporting service sector firms reported an increase in domestic orders, down from +12 per cent in Q2. A balance of zero per cent reported an increase in export orders, down from +5.

BCC Director General Adam Marshall said:

“A strong and balanced economy needs healthy exporters at its core. But while there are some companies bucking the trend, future sales and orders are now well into negative territory, after a steady downward trend in export performance this year.

“On top of Brexit uncertainty and global trade tensions, election turbulence won’t be helping. The next administration will need to most fast to restore confidence, with action to upgrade infrastructure, boost skills and cut business costs.

“Without urgent clarity around our future trading relationship with the EU, firms across the UK will increasingly struggle to fill order books, and jobs and prosperity in many of our communities could be at risk.”

Vice President of Marketing at DHL Express, Shannon Diett said:

This quarter’s report shows clearly that it continues to be a challenging environment for UK exporters. However, despite these headwinds, efforts made by businesses to maintain focus on expansion have translated into an encouraging rise in the Trade Confidence Index.

“Whether expanding to new markets within the EU or elsewhere in the world, diversifying the portfolio of countries in which you operate will help stabilise your business in the coming months and provide a future engine for growth. In this regard a number of non-traditional markets, such as Sweden and Japan present a significant opportunity for UK exporters.

“Working with logistics providers to ensure the transition to any new trade arrangement is as smooth as possible will be vital for exporters looking to mitigate the uncertainty and thrive into the future.

Along with broadening exposure to more markets, taking simple actions like ensuring you are electronically transmitting your customs documentation or sharing your EORI number with your shipper is advisable regardless the ultimate outcome.”

67 per cent of exporting manufacturers cite exchange rates as a factor of concern to their business, up from 63 per cent in Q2. This remains the top factor of concern for exporting manufacturers.

Quarterly International Trade Outlook – Quarter 2 2019

Many UK exporters are treading water at a time of deep uncertainty, according to the latest Quarterly International Trade Outlook from the British Chambers of Commerce, in partnership with DHL.

The survey of 3,400 exporters found nearly two-thirds (63%) of manufacturers report exchange rates as a concern to their business, indicating the pressure from sterling volatility.

The results reflect the negative impact that slowing global trade, currency fluctuation and Brexit uncertainty is having, with export sales and orders weakening. In Q2 2019, the balance of manufacturers reporting export sales increased stood at +14, down from +24 in the same quarter last year. In the services sector the corresponding balance fell to +8, from +17.

The balance of exporting manufacturers that have increased orders also fell to +9, down from +21 in the same quarter last year. In services it fell to +5 from +14, indicating that the ongoing uncertainty is hitting orders books and creating difficult trading conditions for many UK exporters.

At the same time, the volume of trade documents issued by Accredited Chambers of Commerce for goods shipments outside the EU fell 2.1% in the second quarter of the year and stands 3.0% lower than the same quarter in 2018.

In the event of no deal, businesses will face an immediate and abrupt change in trading conditions, for which many remain unprepared. Business has been clear about wanting to avoid a messy and disorderly Brexit but given that no deal remains the default position on October 31st, the new government must urgently ramp up its preparation.

Business is calling on the new government to ensure the conditions and logistical preparations are in place to protect continuity of trade after the UK’s departure from the EU. Firms that currently trade with the EU will need an EORI number to continue in the event of no deal, yet the number of firms that have registered remains worryingly low. The British Chambers of Commerce is urging the government to automatically register all VAT-registered firms to minimise the disruption and administrative burdens facing traders.

The Department for International Trade must also make every effort, working with governments in third countries and the EU-27 to grandfather existing EU Free Trade Agreements, which so many firms rely on to be competitive in key markets around the world. Many businesses report the lack of clarity around future terms of trade, including tariffs and customs procedures, is adding to the feeling of uncertainty and lack of confidence.

Hannah Essex, Co -Executive director at the British Chambers of Commerce, said:

“There is real frustration among business communities across the UK at the lack of clarity about trading conditions after the UK leaves the EU, and we’re already seeing the impact of that uncertainty.

“While the majority of firms want the government to avoid a messy and disorderly Brexit, we’re calling on the government to put practicalities first and implement measures to ensure firms are as prepared as possible for the whatever scenario they face. A crucial first step would be to automatically issue all necessary companies with an EORI number to minimise the hoops that firms need to jump through to be ready for day one.

“There are many fundamental outstanding questions relating to the rules and processes of trade in the event of no deal. While the Department for International Trade has been working with third countries to ensure the rollover of existing FTAs, many of these critical arrangements have not yet been formally agreed, and firms can’t plan for the future based on warm words. Maintaining preferential access to countries where the EU has trade agreements is critical to maintaining competitiveness in key markets.”

Shannon Diett, VP of Marketing at DHL Express, said:

“The 2.1% fall in the Trade Confidence Index compared to Q1 2019 is a strong indication that UK firms, despite a solid export performance, are feeling the impact of the uncertain and challenging market conditions prevailing at this time. Manufacturing and services firms are still reporting an increase in export orders, however, this is at a reduced level in comparison to this time last year.

“For businesses trading internationally in particular, preparing for a potential Brexit, including a no-deal scenario in March, then April and now October has absorbed considerable business resource. This diversion of focus and delay of investment represents a substantial opportunity cost for British business trading internationally. It is however essential that a renewed focus is placed on preparing for Brexit again in advance of the 31 October deadline. There are a number of practical steps that can be taken, despite the lack of clarity on future trading relations with Europe.

“Actions such as implementing digital customs paperwork solutions with your logistics provider, or obtaining an EORI number will help make the transition to new trade arrangements, regardless of the ultimate Brexit scenario, as seamless as possible for exporting businesses. Additionally, increasing the number of markets a business trades with reduces risk and increases growth possibilities in the long term.”

Read the Quarterly International Trade Outlook Q2 2019 HERE

Quarterly International Trade Outlook – Quarter 1 2019

More UK exporters are reporting a decrease in orders in the opening quarter of the year, with cashflow and confidence dipping too according to the latest Quarterly International Trade Outlook from the British Chambers of Commerce, in partnership with DHL.

The report based on the responses of over 3,400 exporters shows that one in five manufacturers (23%) and service firms (20%) saw their export order books decline in the first three months of the year – the highest for both since Q2 2017 when records began.

Two-thirds of exporting manufacturers said exchange rates were of greater concern to them than in the previous three months, reflecting sterling volatility ahead of the original Brexit deadline. Exporters continue to report considerable price pressures, which for manufacturers is mainly driven by the cost of raw materials.

According to the findings, exporters are reporting muted confidence in turnover in the coming year. Nearly a quarter of exporters reported a decrease in cashflow, a key indicator of the financial health of a business – also at its highest level since Q2 2017.

The BCC/DHL Trade Confidence Index, which measures the volume of trade documents issued by Accredited Chambers of Commerce for goods shipments outside the EU stood at 124.04, representing a fall of 1% on the quarter and 2.3% lower than the same quarter in 2018.

The results of the report paint a picture of tough trading conditions, and while the prospect of immediate changes to conditions due to Brexit have been postponed, fundamental questions about the future business environment remain unanswered. Clarity is also needed about the terms of trade exporters will face in many key markets around the world after the UK leaves the EU.

Hannah Essex, Co-executive director at the British Chambers of Commerce, said:

“It’s been a trying time for many exporters with uncertainty in the run up to the Brexit deadlines and continued trade tensions combining to flatten orders and confidence.

“The future relationship with Europe remains unresolved, but so too do the future terms of trade with many other important trading partners. Until the status of free trade agreements with third countries are clarified, UK firms don’t know how their operations in all corners of the world will be affected when the UK leaves the EU in any transition period and beyond.

“Businesses are resilient, but they urgently need parliament to overcome the current impasse and end the uncertainty. Leaving firms in limbo and allowing the political dramas to play out again at the last minute in October will only serve to diminish sales and confidence further.”

Shannon Diett, VP of Marketing at DHL Express, said:

“This quarter’s report shows a small decline in the Trade Confidence Index of 1.02% on the previous quarter and 2.03% on Q1 2018, alongside a decline in export orders, cash flow and a fall in confidence regarding future exports. This paints a fairly bleak picture when the results are taken in isolation, however we’re all aware that uncertainty surrounding the Brexit negotiations was at its peak in Q1 2019.

“These results highlight how critical it is for businesses trading internationally to have information and clarity in advance of the 31 October deadline.

“Every day we witness the drive and creativity of UK businesses who prevail whatever the circumstances, and more than this, seize every opportunity for growth and global expansion. Exporting internationally can be challenging, but the rewards are clear, with those businesses exporting to a high number of countries outperforming the market. The UK has so many strong and inspirational companies that are succeeding and we must ensure that their growth is supported.”

Key findings from the report:

  • 23% of exporting manufacturers and 20% of exporting service firms saw a decrease in exports orders in the first three months of the year, up from 18% and 16% respectively in the previous quarter
  • Nearly a quarter of exporters reported a decrease in cashflow, 24% in manufacturing and 23% in services say it had decreased in the previous three months
  • Confidence in turnover also dipped, with 22% of exporting manufacturers expecting it to worsen in the coming year (up from 14% in the previous quarter) and 18% in services (up from 13%)
  • Two-thirds of exporting manufacturers (66%) and nearly a half (47%) of exporting service firms are more concerned about exchange rates than in the previous quarter
  • Half (49%) of exporting manufacturers expect to increase prices, unchanged from the previous quarter, and 42% of service firms (up from 39%). The cost of raw materials remains the primary cause of cost pressure (79%) for manufacturing firms
  • The percentage of exporters attempting to recruit fell in both sectors, from 68% to 63% in manufacturing and from 57% to 51% in services. The percentage reporting recruitment difficulties remained very high: 79% in manufacturing and 72% in services
  • The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, fell by 1.02% on the quarter and 2.03% compared to Q1 2018.

Read the Quarterly International Trade Outlook Q1 2019 HERE