How achievable is the race to a trillion?
As part of the 2021 Export Strategy, the government set the UK the target of achieving £1 trillion worth of exports per year by 2030. But how achievable is this “race to a trillion”, and is the UK on track to achieve it?
Turning to the numbers, ONS data shows total exports in goods and services was worth £783 billion in 2022. This is an increase of 21% when compared to 2021, when markets were reopening after the pandemic, and 14% higher than in 2019. In order to reach the £1 trillion figure by 2030, total exports would have to increase by an average of 3.5%, or an average of £28.4 billion, each year:
When plotted on the graph, the forecast trend line seems to follow the trajectory from the pre-pandemic dip. Therefore, we believe it is not too ambitious. However, it should be noted that inflation increases the total value of trade whether or not the volume increases, thereby making the government’s proposed measure meaningless when it’s real impact on the economy and exporting businesses is considered.
Our proposal is that the total value of exports should be tracked in combination with the total volume of exports, as this should give a better idea of the whole picture of how many businesses are exporting and to what extent. We would also recommend tracking the data in chained volume measure, which removes the effect of inflation, therefore giving more significance to the UK’s export performance.
But these numbers also do not factor in the impact that the wider policy environment has on business, and some of our members have told us they are feeling constrained by the current exporting conditions.
Our research tells us many SMEs are still suffering the effects of Brexit, finding that pursuing markets beyond the EU can be complicated and feel like second best. Macroeconomic pressures have hampered confidence, and with businesses also having to contend with skills gaps, high inflation and concerns about future growth, they may feel they do not have as much resource to expend on growing their international exports.
We’re calling on the government to have a clear idea of what success looks like, and how they’ll know when UK exports are spearheading growth as well as feeling seamless for business. While the 2021 Export Strategy is a strong package of support, it needs a clearer evidence base on what they need to do to achieve this. More needs to be done to take into consideration the broader UK economic context, which types of businesses need the most support, and which areas of the export process are proving the most challenging.
The IoD will continue to work with the government and our members to help make this ambitious exporting goal a reality.