What impact is the cost-of-living crisis having on UK and global trade? Here's what the data says

Mon 7 Aug 2023
Posted by: William Barns-Graham
Trade News

Global economy


The UK has not yet entered the recession that many analysts were predicting towards the end of last year, but inflation has continued to dominate the economic agenda both home and abroad.

At a global level, fears of an economic and trade slowdown this year have also been widely shared.

But what does the most recent data show about trade performance both home and abroad?

The IOE&IT Daily Update here looks at five recent reports that give a mixed picture of the current trading environment.

WTO report highlights turbulent times

The recent World Trade Statistical Review from the World Trade Organization (WTO) found that merchandise trade volumes grew by 2.7% in 2022, but the first quarter of 2023 saw a 1% year-on-year contraction.

In terms of value, goods trade rose by 12.4%, though the report highlights that is in part a reflection of inflated commodity prices.

“As a succession of crises buffet the global economy, with the Covid-19 pandemic giving way to the war in Ukraine, inflation, monetary tightening, and widespread debt distress, world trade has lost momentum, with trade growth slowing in 2022 and remaining weak into early 2023,” said WTO director general Ngozi Okonjo-Iweala.

“That said, global trade growth has remained positive, underscoring how trade has been a force for economic recovery and resilience,” she said.

Maersk warns of downturn

Industry bellwether shipping giant Maersk recently posted Q2 profits of US$2.81bn before interest, tax, depreciation and amortisation.

However, it also warned of an ongoing decline in shipping demand and its worst-case scenario prediction is a drop in trade volumes of up to 4%.

Maersk chief executive Vincent Clerc told the FT: “We are in the midst of the biggest correction after the Covid boom of 2021 and 2022. It’s always difficult to handle such a radical change in demand… There is quite a significant order book that will be phased in. This is likely to create a difficult trading outlook. We expect a continued correction on earnings.”

Amazon uptick

Despite fears of a global trade slowdown, ecommerce giant Amazon has reported an improvement in overall sales in the three months up to June 2023.

Overall sales in the period rose by 11% year-on-year to £105.4bn, with quarterly profits of £6.7bn, according to the BBC.

The firm’s managing director, Andy Jassy, said the figures showed "another strong quarter of progress".

UK business confidence falls

A survey of 4,000 British firms by accountancy firm BDO has found that business optimism in the UK has fallen due to higher interest rates weakening global demand, the Guardian reports.

The ‘Business Trends’ report has found that manufacturing output has also declined to lows not seen since the early days of the Covid-19 pandemic, while companies are also reducing plans to hire new staff.

“A more pessimistic outlook from businesses and consequent loosening of the labour market are the first indicators of the slowing economic growth expected towards the end of the year,” BDO partner Kaley Crossthwaite said.

Brexit hitting independent retailers

The CEO of the British Independent Retailers Association (BIRA) has told the i news website that Brexit has cut profits for “nearly all” of his organisation’s members that trade with the EU, making them “suddenly uncompetitive”.

Andrew Goodacre said most of BIRA’s 6,000 members would have faced tough choices when adjusting to new administrative requirements resulting from Brexit at the same time as managing the impact of the Covid-19 pandemic.

“At the time, we were still in the throes of Covid and uncertain about the impact of lockdowns, and it was difficult for businesses to find the right way of approaching it,” he said. “I think they nearly all sacrificed some margin. There was no easy solution to having additional costs; it was not possible to add it all on to consumer, so the only resort is to see a reduced margin.”

The Federation of Small Businesses (FSB) recently reported that 13% its members had stopped trading with the EU temporarily or permanently as a result of Brexit.