Exporters go global as widespread economic growth emboldens UK firms

Firms are taking advantage of a weak pound and global growth by ramping up their exporting activity and entering new markets, research carried out for the Bank of England has revealed.

Emboldened by robust economic recoveries across the board, UK exporters have started to enter new markets such as Australia and India, according to data gathered by the Bank of England’s network of economic monitors between August and November.

Growth in goods exports strengthened further to a “robust pace”, according to the report which also noted that existing exporters “had become more willing to step into new markets”.

UK exporters were meeting growing demand not only in Europe, and the eurozone’s boom continues apace, but also in the United States and Far East, and rather than being driven by a narrow set of services, activity was increasing in a range of areas.

“Export demand strength was relatively widespread across sectors such as construction materials, automotive and chemicals,” the report said. It added that some manufacturing exporters selling in foreign currencies had seen their margins rise due to the weaker pound.

The report comes as the UK’s current account deficit narrowed by £3bn in the third quarter, coming in at £22.8bn for the three months from July to September, equivalent to 4.5pc of GDP, according to the Office for National Statistics. UK GDP also grew by 0.4pc in the third quarter and by 1.7pc on the year, beating expectations.

Accountancy was singled out by both the ONS and the Bank of England report as a driver of economic activity.

The central bank’s report said: “Professional services firms across law, accountancy and consultancy reported robust demand for advice related to acquisition of UK assets, or to the establishment of UK operations by EU clients to retain market access.”

While existing exporters were feeling bullish up to late November, UK firms unused to international trade had not ramped up their activity, however.

“There were fewer examples of domestically focused businesses considering exports for the first time than might have been expected, given the fall in sterling,” the report said. It also noted that some EU clients had taken the decision to switch from UK to EU suppliers where contracts expired beyond 2019.

“We think the boost to net exports should pick up next year. It takes a long time for people to adjust to exporting,” said Paul Hollingsworth of Capital Economics.

Annual export growth is close to 10pc year on year and the reason that the trade deficit had not narrowed further in the three months to September, as shown in official statistics, was due to rising imports, rather than sluggish exporting activity, Mr Hollingsworth added.