In 2012, there was a slowdown in world trade, particularly within the Euro area where economic growth has been weak. In contrast, emerging economies, particularly Asian countries, have seen growth in imports of traded goods as their economies have grown.
In recent months, UK exporters have appeared to focus on different worldwide markets, in lieu of the Euro area. Global trade data indicate that over the past decade emerging economies located in Asia and the Middle East have recorded the fastest growth in traded imports, and that they now account for almost half of global imports.
Worldwide imports by area
Notes:
- Data from Netherlands Bureau for Economic Policy Analysis
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Between December 2011 and December 2012, exports to Switzerland increased by 116%.
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Since Q1 2007 and Q4 2012, exports to China and South Korea have been most notable, more than trebling since the start of 2007, with exports to China increasing by 226% and South Korea by 195%.
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Exports to other Asian countries have also grown strongly since the start of 2007, notably to India, which has increased by 83%.
The increase in exports to Asia is partially due to the emergence of the new Chinese middle class and their disposable incomes. This has contributed to a greater demand for British luxury goods, such as fashion items and cars. UK exports have been further supported by dozens of clustered, well-connected new cities that have emerged, such as those in the Shandong and Jiangsu provinces, which are reachable by high-speed rail and national air hubs.
Overall, the long-term change in the geographical composition of UK trade would suggest that the Eurozone may be losing ground to other economies.
Trade with Europe
Export volumes to EU and non-EU countries
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Between Q1 2009 and Q4 2012, the volume of exports of goods, excluding oil and volatile items (such as aircraft and precious stones), to non-EU countries has risen by 44%, compared with growth of only 7% in exports to the EU.
In its December Economic and Fiscal Outlook, the Office for Budget Responsibility (OBR) alluded to ‘weaker expected growth in UK export markets’ as a reason for the UK’s poor overseas trade performance in 2012. This is especially true of Europe, where real GDP fell by 0.4% between the third quarters of 2011 and 2012, with an even bigger contraction of 0.6% in the Euro area.
Over the past year, the ability of UK businesses to export successfully to Europe has been further hampered by the appreciation of the sterling against the euro, primarily reflecting the economic uncertainty surrounding the single currency area. UK exports have as a result become more expensive compared with our main trading partners and have weakened.
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