UK set to continue its reign as world leader of professional services over the next decade
Santander UK has today published a new report with Public First on views of the UK as a trading partner, providing a detailed analysis of key growth markets and options for a future export approach. The research finds that over the next ten years, the UK is set to continue its specialisation as a producer of professional services, namely financial, digital and business services.
A third (33%) of polled business leaders felt that the UK was a world leader in financial services, whilst 26% said the same about technology and digital services, and one in five (21%) about business services and management consultancy.
The research, conducted amongst 2,100 business leaders and decision-makers, found that financial and business services constituted an average of 55.9% of UK service exports since 2016, and 27.3% of all exports in the same period. Moreover, based on Public First modelling, business and digital services have seen significant growth in exports, with the potential to almost triple in export value by 2033.
The UK ranked top when business leaders were asked which countries they would consider for business consultancy and business services, with more than 40% of those operating in professional services agreeing and over 36% across the full sample of participants. When business leaders were asked which countries they would consider for providing software and technology the UK came top within professional services and second across the whole sample.
Evidence suggests traditional manufacturing in service-based economies including the UK is undergoing a productive revolution. Digitally intensive service sectors already add value to UK manufacturing equivalent to over a quarter of total output (25.8%) by enabling additional trade and generating a need for sophisticated technological outputs.
Additionally, the report projects global trade in the environmental sector will concurrently see transformative levels of growth in the next ten years. According to the Public First data, there is 8.2% projected growth in global green exports, this is growing considerably faster compared to growth in global services exports (5.4%) and global goods exports (4.9%), with G7 economies that will partake in a significant portion of this expansion in exports.
John Carroll, head of international and transactional banking, Santander UK, said: “It is reassuring to know many key markets across the world view the UK as positive trading partner when it comes to exports. For UK businesses the possibilities for growth over the next decade are endless, particularly in digital and business services sectors which we are known for. UK manufacturers are incorporating technology to modernise the industry, and the results show this is paying off.
“It is also welcomed that sectors supporting the environmental transition continues to grow, showing the UK at the forefront for green exports. We are delighted that business leaders globally have praised the UK for its high quality and reliable products and services, and we hope UK businesses continue to thrive overseas with our support.”
Gareth Thomas MP, minister for services, small business and exports, commented: “This new report is a blueprint of opportunity to help us unlock the barriers to trade for UK companies. We can’t do this in isolation. It’s essential we work with businesses, like Santander, to enable more SMEs to export internationally. The UK is a proud trading nation, our goods and services are in high demand overseas and we’re working hard on developing our export strategy to support this.”
Damayanti Chatterjee, senior economist, Public First, said: “The new government’s commitment to growth-led prosperity means that getting international trade and exports right is more important than ever. Our new report shows that the UK is in a strong position to do that, with sustained growth in professional services, opportunities to transform manufacturing in the digital age, and a strong reputation abroad for reliability and quality on which to build. A three-way partnership between businesses, government, and the wider private sector that supports British SMEs in their continued recovery after the pandemic and a period of high inflation is key to unlocking the full potential of British exports over the next decade.”
United States
The data finds that US business leaders stand out for their positivity towards the UK as a trading partner. Accordingly, exports to the US are also set to continue outpacing UK exports elsewhere, such that by 2033 a quarter of all UK exports will be destined for the US. Moreover, as the world’s largest tech market, digital services could add an additional $10tn to US GDP if fully harnessed, which in turn would significantly increase demand for UK digital service esports as well as other services, driven by continued high growth in US per capita GDP. As the UK’s most important market, medium-term export strategy must ensure that professional services exports keep pace with American growth whilst significantly expanding digital exports to meet demand from this economy.
India
Based on the Public First and Santander research, India was found to be a fast-growing market in which the UK can look to significantly expand the volume of core service competencies in the next decade. Results show that Indian business leaders were the most enthusiastic about the UK and in particular feel that that the UK labour force is more highly-skilled than comparable countries with regards to technology (selected as such by 44.9%) and IT consultancy (41.9%).
Up until now, higher education and specialist manufacturing have dominated exports, but student visa restrictions and India’s continued transition to a services-based economy means the UK should look to expand the prominence of digital and business services within in its Indian export portfolio given positive business sentiment towards the former and strong recent growth in the latter.
Poland & Spain
Poland is a market in which the UK can retain its competitiveness in manufacturing whilst boosting its energy and fuel exports. This market stands out as one where UK manufacturing exports have kept pace with global levels despite Brexit, likely due to strong economic development driving higher levels of demand. Geopolitical events have also significantly boosted fuel exports to Poland, and an expansive export strategy could build on continued uncertainty here.
In contrast, Spanish business leader sentiment shows clear evidence of a Brexit effect, with a third citing unfavourable trading policies as a disadvantage of a business relationship with the UK. A greater proportion than in other markets also report expecting to trade less with the UK than they would have five years ago. Accordingly, business leaders in this market would prefer a European or US supplier to a British one in all the sectors tested.
Japan
As a large, developed market, the UK must continue its expansion of digital service exports, in addition to sustaining growth in core business and financial services exports. Japanese business leaders largely do not consider the UK a go-to supplier for professional services or manufacturing, citing geographic distance and time zones as key disadvantages to trade with the UK. Despite the UK not being considered ‘go-to’ as a supplier, the UK’s CPTPP membership, which will come into force in December, will support growth in trade with Japan. The treaty will help to ensure that the UK is considered more actively as a potential supplier by Japanese business leaders are necessary to boost exports in this market.
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