Sluggish trade data for October as global recession gathers pace

Tue 13 Dec 2022
Posted by: Phillip Adnett
Trade News

UK economy - trade stats

The value of UK goods exports decreased by £0.7bn (2.2%) in October 2022, with exports to both EU and non-EU countries falling, according to new data from the Office of National Statistics (ONS).

After removing the effect of inflation, exports of goods were down by £1.3bn (4.7%), the ONS said..

Although services held up better, overall export performance continued to undershoot the OBR’s 7.3% forecast growth for this year with only two more months of figures left to come.

Exports and imports

The falling price of gas was behind an 11.6% fall in non-EU goods export values in October from their September peak.

EU countries have also likely reached the gas storage quotas that was set by the European council in June.

EU goods exports were driven down by the lower sales of fuels but machinery and transport equipment rose slightly. 

Non-EU goods export values were down by £0.5bn (3.9%) after removing the effect of inflation, largely down to falls in the material manufactures sector, with chemicals, machinery and transport equipment also slightly lower. Sales of oil to China rose.

UK goods imports in October rose by 2.3% after removing the effects of inflation with chemicals imports from the EU the principal driver of an 8.3% rise in EU goods imports values.

Three-month trend

Comparing the quarter to the end of October, total UK goods exports fell by 0.6% compared with the three months previously to end of July while imports rose by 0.6%.

Services performed better with a rise of 2.4% in exports over that period accompanied by a 1.4% rise in imports.

Total trade value over that period increased by 0.9% in exports and 0.8% in imports.

There was better news on the trade deficit which narrowed by £5.1bn in the three months until the end of October, excluding inflation and precious metals.

Manufacturing concerns

Investment in British manufacturing is set to fall for the first time in nearly two years as companies start to cut spending head of a recession next year, according to a survey by trade body Make UK.

Chief executive Stephen Phipson said that there was “simply no sugar-coating the outlook for next year and possibly beyond”, calling for a long-term industrial strategy from government to prevent the UK “sleepwalking into an acceptance that little or no growth is the norm”.

The FT reports Make UK’s forecast output would fall 4.4% this year, compared with a “very strong” 2021, carried a warning that further declines would follow.

Unfinished business

A new report by Barclays reveals that goods with a total value of £23.6bn are awaiting completion in UK manufacturers’ warehouses because of supply chain delays, reports Gloucester business website Punchline.

The study found that over seven in ten (72%) businesses are currently holding onto items awaiting completion because raw materials, ingredients or component parts have not yet been delivered from suppliers. On average, this is worth more than £1m to each company impacted.

Concerning economy

According to the Telegraph, the UK economy shrank by 0.3% in the three months to October, following a contraction of 0.6% in September, suggesting it is already in recession.

ONS’ director of economic statistics production and analysis Darren Morgan told BBC Radio 4’s Today programme that strikes – particularly by rail workers – had hit the hospitality sector hard, while port strikes had hit hauliers.

“They told us the most common impacts were they weren’t able to get the necessary goods or services and were unable to operate fully,” he said, confirming the effect of mounting industrial unrest.

‘Worse before it gets better’

Chancellor Jeremy Hunt said ONS figures pointed to an economy that “will get worse before it gets better”, reports the BBC.

There was a brief respite in October when the economy grew by 0.5% compared with the previous month when output was affected by the additional bank holiday for Queen’s funeral, which meant that some businesses closed or had shorter opening hours.

Other figures point clearly to recession, including the weakness of consumer-facing services which are still 8.9% below their pre-pandemic levels.

There was also a sharp reduction in electricity and gas use in October, down 4% against the year before.

Trade deals

The Guardian reports that the official statistics watchdog reprimanded the government for claiming the UK had secured £800bn in “new free trade deals” post-Brexit.

UKSA chair, Sir Robert Chote said “it is misleading to describe the £800bn figure as a measure of ‘new global trade’ resulting from the recent deals. That would imply that there had been no trade with these countries before the recent deals and that there would be none now without them.”

According to the BBC, the government is also set to miss its target for securing post-Brexit trade agreements, as figures show a 15% fall in the number of UK exporters.

HM Revenue and Customs data shows the number of UK firms classed as exporters fell from 149,443 in 2020 to 126,812 in 2021.

A government source said a trade deal with the US had been crucial to meeting the target, but the Biden administration was not prioritising it. It also missed a target for a free trade deal with India by Diwali.

A recent report by the Office for Budget Responsibility (OBR) forecast that Brexit “will result in the UK’s trade intensity being 15% lower in the long run than if the UK had remained in the EU”, Politico reports.