The latest estimates released on International Trade in Services (ITIS) indicate that Europe has continued to be the dominant market for both UK exports and imports of services. These services are defined as intangible commodities such as the provision of legal services from overseas.
ITIS figures published in February 2013 show that:
Total UK exports of services increased from £89.5 billion in 2010 to £97.3 billion in 2011.
Total UK imports of services increased from £42.1 billion in 2010 to £43.6 billion in 2011.
Europe now accounts for 50% of the total value of UK exports of services and 51% of the total value of UK imports of services.
Percentage contributions to total exports/imports
UK exports of services to Europe
The top five countries for UK exports of services in 2011 were:
Irish Republic (£6.1 billion)
Switzerland (£6.0 billion)
Germany (£5.5 billion)
Netherlands (£4.8 billion)
France (£4.1 billion)
Switzerland headed this list in 2009 and 2010, but has been displaced by the Irish Republic, which had UK exports of services valued at £6.1 billion in 2011 compared to £5.4 billion in 2010, an increase of 13%.
Why is the UK exporting more services to the Irish Republic?
A key reason for this increase may be the growth seen in the Irish Republic’s economy in 2011. The annual GDP growth rate for the Irish Republic increased from -0.8% in 2010 to 1.4% in 2011 (Central Statistics Office Ireland). This growth may signal an economic recovery and could put the Irish Republic in a more stable financial position to increase trade with the UK.
UK imports of services from Europe
The top five countries for UK imports of services in 2011 were:
Germany (£3.8 billion)
France (£3.4 billion)
Irish Republic (£1.9 billion)
Netherlands (£1.5 billion)
Sweden (£1.4 billion)
The 2011 figures show that the UK continues to turn to Germany over other European countries for its imports of services. This is despite the value of UK imports of services from Germany decreasing by 9% in 2011. Meanwhile, UK imports of services from France increased by 14%.
Sweden has also shown strong growth with regards to UK imports of services, which increased 26% in 2011, placing it just above Switzerland on the list.
How do these numbers compare over time?
UK exports of services to Europe have increased at a steady rate with the 2011 value of £48.9 billion being almost double the 2005 value of £26.7 billion. In comparison, UK imports of services from Europe have experienced more laboured growth in recent years, with growth remaining relatively static.
Total UK imports and exports of services to Europe, 2005-2011
So what do these figures indicate?
The figures show that the long-term trend of the UK exporting more services than it imports has continued, and that the majority of the UK’s exports of services are destined for Europe. The close proximity of European Union countries to the UK explains in part why many UK exports end up in Europe. But what explains the subdued growth of UK imports from Europe from 2010 onwards?
The year 2010 was one of recovery for the UK economy with the annual GDP growth rate increasing from -4.0% in 2009 to 1.8%. Although the growth rate was typically much lower than pre-2008 levels, it was heading in the right direction. There were, however, still problems in the euro zone, with the debt crisis in Greece, Italy’s downgraded credit status and falling world stock markets creating political and economic uncertainty.
These factors, coupled with the UK importing more services from stronger markets such as Asia, may have contributed to the UK trading with Europe with an air of caution, stemming the growth seen in imports from 2010.
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