UK manufacturing exports hit record low
UK manufacturing exports fell sharply in Q2 2020, according to the Lloyds Bank International Trade Index. The speed of decline was the fastest since data collection began in 1996, driven by the impact of coronavirus on both international supply chains and falling overseas demand for British goods and services.
The Index hit a new low of 34.6 for new manufacturing exports between April and June 2020, representing a dramatic decline from 46.8 in Q1 2020. The previous historic low of 38.8 was recorded in 2009 amid the global financial crisis. A reading below 50 signals a reduction in new export orders, while a reading above 50 indicates growth.
Of those manufacturers that reported a downturn in overseas orders, the vast majority (93%) attributed it to the impact of coronavirus, blaming the pandemic for shrinking demand, widespread business closures, and delays to export projects.
Basic metals (28.3) and automotive (31.5) exports were hit hardest, reflecting a fall in global demand for manufacturing components and the shutdown of car production in Europe.
Exports of chemicals and plastics (41.1), including pharmaceuticals and healthcare products, fell at a slower rate than other manufacturing goods. This was in part due to forward purchasing by overseas buyers in expectation of delivery delays.
The end of the second quarter of 2020 saw early signs of international demand returning with June showing an increase in appetite for British consumer goods.
In June, UK clothing and textiles (50.7) and other manufacturing (56.7) goods (which includes sports and leisure equipment), furniture, and luxury items such as jewellery manufacturing exports grew.
UK services exports fall to historic lows
Meanwhile, UK services firms saw the sharpest drop in new overseas work since the inception of the Services New Export Business Index in 2014, measuring 29.2 in Q2, down from 42.7 in Q1. The fall was mainly due to international travel restrictions, with business-to-business (28.5), transport and communication (29.8) and technology (29.8) services all severely affected.
Challenging climate for UK exporters
Sharp economic contraction in the majority of UK export markets, including the European Union and North America was also recorded, driving a trade-weighted measure of global demand for British goods and services to a record low of 35.2 in Q2 2020.
China, after posting a reading of 42 in Q1 2020, was the only UK export market to see an increase in Q2 (52.6), as the country’s lockdown measures eased.
Gwynne Master, managing director and global head of trade for Lloyds Bank Global Transaction Banking, said: “The results demonstrate the full impact of the pandemic as swathes of the global trade markets shut down amid efforts to help contain the spread of the virus.
“Export measures hit an all-time low in Q2 although we see small signs of recovery as early as May and into June. While it is too early to talk about the trajectory of recovery, it is encouraging to see enhanced external demand, signs that China’s economy is stabilising, and some UK consumer goods export growth in June.
“Government schemes and finance options continue to be made readily available, which will help UK exporters continue to trade, to position for a return to normality to international trade, and to prepare now for potential future disruption.”