A recent business monitoring report states that the UK export market has shrunk in Q4 2018 to its lowest level since 2015. UK exports growth has continued to fall since its peak at the beginning of 2017, however, this is the first quarter in which the UK’s export score has shown a contraction in the market.
Recent Brexit uncertainty is again highlighted as a problem for British business. However, the report also points out that many other factors are affecting the current state of UK exports. Political and economic turmoil in the EU and a slowdown in growth from many of the world’s major economies paints the picture of a business climate uncomfortable for many corporations.
Brexit Pause Hits UK Business
The report into UK exports praises the resilience of UK businesses. However, this resilience, in many sectors, is now turning into stagnation. The Office of National Statistics reported that UK business investment fell for three consecutive quarters in 2018 to lows last seen during the financial crash. Investment is a key component in growth across all sectors, which is why many industries have reported similar growth contractions. A prominent example is the services industry, whose recent reports highlighting record lows for growth have led to many believing the UK economy could stagnate in Q4 2018.
The risk outlined by many, including in this report, is of a disorderly Brexit. With companies unable to have confidence regarding the likelihood of a future trade agreement beyond March 2019, businesses have to re-evaluate their plans for next year. Some companies have changed business strategies to target more stable markets around the European Economic Area, whilst many more are holding off on investments until the business landscape is certain. Many industries do expect business confidence, investment and the economy to bounce back in the event of a deal being agreed, but until that is certain, this outlook of minimal growth will continue.
A Troubled EU Economy
The reason Brexit is having such a significant impact on all aspects of UK business is due to the deep trade ties between the UK and EU. In the recent manufacturing sector report, they highlighted that many companies hope to continue importing and exporting the majority of their goods between these trade routes in the future. A similar picture is seen across British trade, where just under half of all exports are currently to the EU and over half of all imports are from the region.
However, many factors play a role in the exports market. The report makes a note of the many economic and political problems being faced domestically by Britain’s biggest trade partners. Whilst the UK’s export score fell by 0.7 from Q3 to Q4, the country’s two biggest trade partners inside the EU – France and Germany – saw considerably larger drops in performance.
The report highlights recent regulations in the German automotive industry as the cause for their exporting decline. However, France’s decrease is related to current domestic political uncertainty, which has halted economic growth patterns. This particular problem is becoming more frequent in the global economic climate and is having a direct impact on global demand.
The eurozone recently reported its worst levels of growth in around four years, primarily as a result of a stalling Italian economy. The two biggest economies, the US and China, have both reported economic slowdowns in recent months, partly as a result of trade sanctions but also due to domestic financial pictures. These are some of the reasons why analysts are predicting a challenging early 2019 for global businesses. Regardless of the final result of Brexit negotiations, the future for British exports will be challenging.
With a perilous future outlook for businesses, it’s vital that they look at all possible ways they can support potentially fluctuating incomes during this turbulent period. We at ERA are one of the leading procurement services companies and have helped major national and international businesses streamline their supply chains. Our specialists are experienced in specific sectors and work with businesses to save millions in key cost areas such as fleet, packaging and utilities. So, if you want to optimise your procurement strategies as we head into this turbulent period, get in contact with us today.