UK exports tipped to grow 64 per cent in next 10 years
New market intel from Barclays suggests UK exports will increase by more than 64 per cent from £536 billion currently to £889bn in the next 10 years. Despite the spike in value the rate of growth will slow, the bank warns.
Two other major trade shifts will see China become Britain’s sixth largest export market by 2026 – it was 16th 10 years ago – while overseas sales of services will match those of goods for the first time.
Cambridge-based Jane Galvin – managing director of corporate banking at Barclays Eastern Region – says the US and Germany will remain the UK’s two largest individual export destinations but emerging markets will continue to rise in importance as trade hotspots.
Overall growth in UK exports between 2016 and 2026 will be weaker than in the past decade, with annual growth rates slowing to 5.1 per cent over the 2016-2026 period, compared to 5.6 per cent growth over the past decade.
This reflects a softer overall outlook for global growth and trade in coming years, driven by financial and geopolitical uncertainty and high private-sector indebtedness. The share of services in total UK exports is expected to hit parity with goods from 2026, up from 44 per cent in 2016, marking the tipping point when British exports will essentially become service-led, according to the Barclays Trade Index.
This milestone will be reached due to continued positive growth in service exports, which will grow in aggregate more rapidly than goods exports.
Galvin said: “These latest findings demonstrate the increasing importance of the UK as a global services hub, in addition to the traditional UK stronghold for goods. The UK is expected to continue performing strongly with higher-value, higher-margin products in the coming years.
“The outlook for global growth, and UK trade, over the coming years may appear more uncertain than it has been for some time, but as always there will be countries continuing to offer opportunities to UK exporters. “The transatlantic connection leads the way with the US set to remain our largest individual trade partner over the next 10 years with countries in the EU another key export destination for UK companies.
“But there will also be increasing opportunities for trade with markets such as India, Vietnam and Indonesia, both of which are large markets with strong growth prospects, alongside China, a trade destination which in our index is forecast to jump to be the UK’s 6th largest export market in 2026, from 16th in 2006. “Companies should look to continue to explore a broad range of export markets and be ready to respond to shifting consumer demand.”
The US was the UK’s largest trade partner in 2015 and is forecast to remain the leading export destination in 2026 with Germany also retaining its second-place ranking.
However, over the next decade, as the UK continues to develop and deepen its trade links with more emerging economies, the share of total UK exports destined for the US will drop slightly from 16 per cent to 15 per cent with Germany also experiencing a gradual decline from eight per cent to seven per cent.
Among the UK’s current 30 largest trading partners, the strongest export growth in the next decade will be to China. The value of trade to China is expected to expand 115 per cent between 2016 and 2026, although this pace of expansion is considerably weaker than the 213 per cent experienced over the past decade.
Furthermore, with the emergence of trading partners including India, Indonesia and Vietnam and the ongoing importance of the large BRIC markets, the share of UK exports to the EU will continue to decline gradually. However, the bloc will remain, by far, the UK’s largest single trade partner, accounting for 42 per cent of all goods and services exports in 2026, compared to 43 per cent today.
Within the EU, higher growth markets including the Baltics, Czech Republic, Bulgaria and Romania are also expected to offer significant growth opportunities in coming years.
The UK’s fastest-growing export categories over the next decade will be business management and consulting, insurance and pensions, and education.
More limited opportunities for traditional revenue growth will drive demand for professional advice on cost-cutting, mergers & acquisitions, and overseas expansion activity. Ageing demographics, regulatory reforms and unprecedented low interest-rates will spur demand for insurance and pensions services. There are also positive growth stories within goods trade, with exports of chemicals expected to show the largest absolute rise.
With growth of 54 per cent forecast for the decade ahead, the transport sector is also expected to be a strong performer, with significant investment in technology and innovation in the automotive and aerospace industries providing a strong foundation for future growth, alongside policy initiatives and funding support.
However, fuels will become the weakest-performing area of the UK export mix, driven by the end of the two-decade commodity super-cycle and the slowdown in China’s industrial sector.