England and Wales exporting fewer manufactured good to the EU

The analysis of data as part of the Make UK/BDO Regional Manufacturing Outlook Report 2023 shows that the UK’s overall share of manufacturing exports to the EU increased in 2022 to 52 per cent from 50 per cent in 2019, but this was due to increases in the share of exports to the EU from Northern Ireland and Scotland over the same period.

Northern Ireland’s Dual Access position gives it access to the Single Market for goods and is able to trade goods freely into the rest of Great Britain, while in Scotland the oil and gas sector and its supply chains boosted exports to the EU during the ongoing Ukraine crisis.

The share of goods exported to Asia & Oceania and North America has remained relatively stable at around 16 per cent since 2019, indicating that UK manufacturers are looking at opportunities outside their traditional big three markets.

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According to Make UK, this has significant implications for government policy on export support if the share of trade with the EU is falling and businesses are looking for opportunities elsewhere. In response, Make UK is calling for a boost to export support for companies, plus changes to existing structures to provide more support for companies exporting to countries outside the EU.

In a statement, Richard Austin, head of manufacturing at BDO, said: “These figures are reflective of the combined impact of Brexit, the pandemic and the Ukraine war. UK regions are the powerhouses of UK manufacturing, but the body blows of the last few years are taking their toll. Manufacturers have warned that the shackles of red tape, supply chain pressures and rising costs are at risk of permanently undermining the competitiveness of UK goods.”

According to the analysis, London and the South East and the East of England (49 per cent to 50 per cent and 49 per cent to 54 per cent respectively) have seen their share of goods exports to the EU increase since 2019 (the last full year before the Trade & Co-operation Agreement), whereas all other English regions and Wales have seen falls. By contrast, in the same period Northern Ireland has seen its share increase from 59 per cent to almost two thirds (64 per cent), while Scotland has seen an increase from 50 per cent to 59 per cent.

The South West’s share of goods exports to the EU was the lowest of all UK regions in 2022 at 42 per cent, followed by the West Midlands (45 per cent) and East Midlands (49 per cent).

The analysis also shows that some UK regions are seeing a sharp divergence in exports to North America and Asia and Oceania that may be linked to sectoral strengths.

The West Midlands saw almost a quarter of its exports go to North America (24 per cent) in 2022 compared to 17 per cent to Asia & Oceania, mainly driven by automotive linked exports. Wales also saw a difference between the two markets with 19 per cent going to North America and 11 per cent to Asia and Oceania, mainly linked to the aerospace supply chain in Wales. The East Midlands saw a quarter of its exports go to Asia & Oceania and 14 per cent to North America.

To help boost exports, Make UK has made the following recommendations:

Extend the geographical reach of the Export Support Service (ESS). The ESS should be extended to include all key UK export markets, not limited to the EU. In addition, a ‘continuous improvement’ approach to the advice available should be embedded as early evidence suggests in its current form it is a ‘signposting’ service and not for bespoke advisory work.

Ensure the package of grants and practical support to assist exporters attend trade shows and similar events overseas remains in step with export market priorities and demands of exporters: Government should consider re-instating the Trade Access Programme (TAP) which was valued by manufacturing SMEs. This would help ensure current programmes meet the demands and priorities of existing and potential exporters.

The Export Academy (or similar channel) should create a bespoke financial package to boost the skills base for exporters to improve knowledge in exporting. Company level exporting strategies should be as important as a marketing or business development strategy, however businesses do not have easy access to provision to help build that expertise domestically. Too often business export strategies are underutilised, therefore there is a need to identify partners to build up UK expertise on trade through schools, universities and within business.