Trade statistics released today highlight the challenges UK exporters have faced and continue to face in 2020, as Britain’s short-lived trade surplus ended. In September 2020, UK imports increased by £3.6bn to £49.2bn while exports flatlined at £48.5bn – a monthly deficit of £600m. This 8.0% increase in imports can likely be sourced to an increase in demand as we continued to live in loosened COVID-19 restrictions. The statistics for November 2020, when released, will likely show a dip in imports but not quite as drastic as we saw over summer.
The third quarter of 2020 (July-September) saw a similar story, with growing imports outstripping export growth. Imports grew £17.3bn (14.0%) on the previous quarter to reach a total of £140.5bn, whereas UK exports grew only £13.8bn (10.6%) to £144.7bn. This left a total trade surplus, excluding precious metals, of £4.2bn – a decrease of £3.4bn on the second quarter of 2020.
UK service exports, the longstanding backbone of the national economy actually fell by £0.3bn while imports grew £0.7bn highlighting that while business conditions have improved from the middle of the first lockdown, firms across the whole range of the economy still face significant challenges.
A significant portion of quarterly trade growth has come from an increase in machinery & transport and manufacturing products imports and exports. As COVID restrictions loosened, the demand for road vehicles has rebounded. Imports and exports of road vehicles increased £5.4bn and £4.7bn respectively in Q3 2020 as dealerships reopened. Exports of road vehicles to non-EU nations increased by 171.8% (£3.1bn), while exports to EU countries increased 114% (£1.7bn). In September 2020 there were 328,041 new car registrations in the UK. This is 4.4% below the same month in 2019, but a marked improvement from the May 2020 low point where registrations were 89% below the previous May.
When we look at the annual statistics (September 2019 - September 2020) we begin to see the extend to which COVID-19 has impacted international trade. UK exports in the 12 months to September 2020 were worth £602.4bn, a decrease of £75.1bn or 11.1%. Imports paint a similar picture with a total value in the same period of £597.2bn, a fall of £111bn or 15.7%. This left the total trade balance for the year at £5.2bn.
As UK exporters still face significant challenges to return to pre-COVID levels of activity, it is important to acknowledge the additional challenges they are set to face. The second lockdown in November is likely to take a toll on both importers and exporters and when it ends businesses will have less than a month until the end of the transition period. Government must be realistic about its expectations of importers and exporters, who have already faced the toughest year in living memory, and their ability to adapt to huge changes in the trading relations between the UK and the EU without severe disturbances. Government’s first priority when it comes to international trade must be to secure a deal with the EU that supports traders and minimises disturbances, and then provide the financial support and guidance that businesses will need as we move into 2021.