Exporting out of recession - Business, Innovation and Skills Committee Contents


1  Introduction

1. On 4 February 2009 the Committee announced its inquiry into "Exporting out of recession". It posed the questions: "What should be done to sustain and increase Britain's export strengths? Is there more the Government or UKTI could do to support exporters, to identify key sectors or to reprioritise markets?"

2. The backdrop to this inquiry is the sharp and synchronised downturn in the world economy. The then Department for Business, Enterprise and Regulatory Reform, at the start of our inquiry, set out the challenges facing the UK and UK businesses:

The UK's traditional export markets, in Europe and North America, have been disproportionately affected. In 2007, the United States and the EU together accounted for 68 per cent (£251 billion) of total UK exports of goods and services. A recent World Bank forecast is that volumes of world trade in goods and services are expected to drop 6.1 per cent in 2009, and that global GDP is expected to contract by 1.7 per cent in 2009—the first decline in world output on record. High income countries are in deep recession, with OECD economies likely to contract by three per cent and other high income countries by two per cent. GDP among developing economies will grow at 2.1 per cent, compared to 5.8 per cent in 2008.[1]

3. The Government stated in its submission that it considered UK exports to be "critical to individual companies and to the wider economy."[2] It is right to highlight this point. As the Department notes:

For companies, investing and selling overseas tends to improve productivity, innovation and financial performance. Selling overseas helps businesses achieve economies of scale and levels of growth and revenue not otherwise possible; reduce their dependence on a single or small number of markets; and increase the commercial life span of their products or services, with raised returns on investment. These companies are more likely to have capital to invest in new innovation and product development in the UK, and to maintain or create jobs.[3]

4. As well as bringing a multitude of benefits for businesses increased, UK exports—of both manufactured goods and services—have a potentially crucial role to play in hastening the end of the recession for the nation as a whole. This was a point that Lord Jones made repeatedly during his appearance before us:

[…] I will tell you that the only way this country is going to get out of [the recession] quickly is to trade its way out of it. If Britain was a company I would be saying, 'The fundamentals are okay, you're not going to go bust, but this is going to be bloody.' Now, how do you address it? You trade your way out of it. If this was a business, you would be trading your way out of it: head down, batten down the hatches, work hard and deliver the goods, and get the profit and start regenerating the business. That would be the same for this country.[4]

5. We understand and agree with the argument that a strategy to boost UK exports should not be based primarily on short-term currency movements and, indeed, that many countries have successfully developed their export performance with a strong currency. It is however, true that when sterling is relatively weak, companies can reduce export prices or build margins and so boost profitability. This Report examines what Government can do to ensure that our exporters derive the maximum benefit from their opportunities in overseas markets—opportunities undoubtedly enhanced by the low value of the pound, and opportunities, which if seized, will help the whole economy to recover.

6. Government assistance is provided through a number of initiatives, but at the heart of its trade policy is UK Trade and Investment (UKTI). Our inquiry focuses on UKTI, and assesses the extent to which it is helping the UK to export its way out of the current recession. We also consider the individual programmes offered to businesses by UKTI, and how well they are aligned to business needs.

Trade Policy

7. Government efforts to promote international trade can only be successful when international trade policy has created an environment in which trade can flourish. Britain can be proud of having one of the most open and free trading environments in the world. There were fears that the onset of the recession could trigger a new wave of protectionism in which countries engaged in short-sighted measures in an attempt to protect their own industries. Thankfully this did not happen, but there are still important trade policy issues which need to be resolved. We welcome the recent progress made in the EU free trade agreement with South Korea. We also want to see a wide ranging, free and just conclusion of the Doha round of trade negotiations, which have dragged on for far too long. However, as important as these issues are, they are not subjects for this inquiry, which focuses on trade promotion.

Our inquiry

8. In the course of this inquiry, we received written submissions from 23 organisations. We held three oral evidence sessions: the first was with Lord Jones of Birmingham, formerly Minister of State for Trade and one of the UK Business Ambassadors. The second session was with Lord Davies of Abersoch, the current Minister of State for Trade and Investment and, Mr Gareth Thomas MP, Minister of State, Department for International Development. At the final session we took evidence from representatives of the CBI, British Chambers of Commerce and Sponsors' Alliance.

9. We also undertook two visits in connection with the inquiry. The first was to the UAE and Saudi Arabia to look at the challenges and opportunities presented by emerging markets. The second was to France and Italy to examine UK trade relations with established markets. Both visits gave us the opportunity to be appraised of activity on the ground. By speaking with people who deal with trade issues on a daily basis we were better able to assess the extent to which UKTI has right priorities for the very different markets around the world. A full account of our visits can be found in the Annex at the end of the Report. We would like to thank all those who contributed to our inquiry.


1   Ev 58-59 Back

2   Ev 58 Back

3   EXP 1 para 2.2 Back

4   Q2 Back


 
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Prepared 28 January 2010