New data from the Office of National Statistics has found that the UK’s trade deficit has increased at a record rate. 

The latest figures from the ONS show a fall in the value of imported and exported goods, creating a quarterly trade deficit of £27.9bn – up £2bn on the previous period. 

This marks the biggest jump in the gap between the value of exports and imports since 1997, with soaring energy costs, inflation and Russia’s invasion of Ukraine all contributing to an increasingly difficult trading environment. 

In detail, imports increased by £14.3bn, with exports also rising but more slowly to £12.3bn, leaving a total trade deficit against the UK’s GDPR of 4.5%. 

More positive however was the UK’s trading relationship with the EU, with the value of goods moving back into the European Union rising 16.3% thanks in part to the re-exportation of fuel, ships, aircraft and mechanical machinery. 

Exports to the rest of the world also rose by just under 9%. 

This leaves a confusing picture as to how the UK economy is performing on the international stage, and just how able businesses have been to mitigate not only Brexit, but also recover from the pandemic and now mitigate inflation, war-related supply disruptions and surging fuel costs. 

Read more: HMRC urges firms to adopt Customs Declaration System or ‘risk being unable to bring goods into UK’

Director general of the IOE&IT, Marco Forgione cautioned that: “Although superficially the ONS figures look positive, the IOE&IT Monthly Exporter Monitor shows that fewer companies are exporting and fewer goods are being exported. 

“This indicates there is significant inflationary pressure building in the economy.”

The UK and the Gulf Cooperation Council have kicked off the first round of trade talks in Riyadh in a deal that could cover more than £33bn in annual trade. 

The GCC, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, would be equivalent to the UK’s seventh-largest export market, with demand for international products and services in the region expected to rise to £800bn by 2035. 

The deal itself is expected to be worth around £1.6bn a year to the UK economy. 

These latest talks follow similar discussions with Canada and Mexico earlier this year. 

UK international trade secretary, Anne-Marie Trevelyan, commented on the kick-off of trade negotiations that: “Today marks the next significant milestone in our 5-star year of trade as we step up the UK’s close relationship with the Gulf.

“Our current trading relationship was worth £33.1 billion in the last year alone. From our fantastic British food and drink to our outstanding financial services, I’m excited to open up new markets for UK businesses large and small, and supporting the more than ten thousand SMEs already exporting to the region.

“This trade deal has the potential to support jobs from Dover to Doha, growing our economy at home, building vital green industries and supplying innovative services to the Gulf.”

Key winners from any trade deal would include British farmers and producers, whilst tariffs on items such as chocolate, baking products, biscuits and smoked salmon could all be cut. 

A trade agreement would also open up the door to more inward investment from the Gulf into the UK, with investments from the region already supporting around 25,000 jobs in the UK alone. 

Exports of food and drink products by UK exporters have risen above pre-pandemic levels. 

Data from the Food and Drink Federation found that exports to non-EU countries rose 16.2% in the first three months of the year, almost 11% higher than in Q1 2019. 

Total non-EU exports of food and drink are now worth a record £2.3bn, with sales to Australia, Canada, India, Japan and the US showing the most growth. Beef exports rose 80%, with whiskey, chocolate and gin also seeing sustained growth. 

Whilst food and drink exports to the EU still remain higher at £3bn, the rise in sales further afield may be a sign that UK firms are starting to broaden their horizons in the wake of Brexit. 

The FDF predicts that further growth is on the cards, with the UK-Japan trade agreement already signed and new deals with Australia and New Zealand on the cards. 

Read more: 5 ways the crisis in Ukraine is impacting international trade

Association director of the FDF, Nicola Thomas, noted that: “Such strong growth highlights how with widespread economic and political instability around the world, a renewed focus on exporting is a crucial risk-mitigation strategy for UK Food and Drink companies in 2022.”

EU still a major market

Despite Brexit, the EU trading bloc remains a core and critical market for many exporting firms, and the pandemic, war in Ukraine and the UK’s departure from the European Union have caused massive upheaval for import/export businesses. 

We’ve created a free checklist you can download to help navigate the choppy post-Brexit waters – ideal if your organisation has limited experience with customs declarations, licenses, VAT on imports or rules of origin. 

Get your free copy here.

The UK is close to signing mini trade deals with six individual US states. 

Speaking in an interview with Bloomberg, UK trade secretary Anne-Marie Trevelyan revealed the likely deals were memorandums of understanding covering areas including mutual recognition of professional qualifications and improved access to procurement contracts. 

Some of the states in question include Indiana and Texas, with the former being an important potential partner for the UK as it’s one of the largest US exporters of maize, soya beans and tomatoes. Other states that the UK has been in talks with include California, Georgia, Tennessee, Oklahoma and South Carolina. 

Trevelyan said in her interview that: “The US big-picture deal is important and we’ll get there when the White House has the view that they have got their domestic situation [under control], and they want to look out again.

She added: “In the meantime, there’s loads that businesses would like us to try and sort out in terms of market access barriers.

“State-by-state we are doing all sorts. “We’ve got some really good discussions going on. Watch this space.”

Read more: ‘Don’t take UK exporters for granted’ warning as trade deficit widens

The ‘domestic situation’ Trevelyan refers to is in the main the Northern Ireland protocol for which President Biden has been outspoken. Increased efforts have been seen over the last couple of weeks to find a resolution, and those on the US side of politics believe trade issues relating to the protocol can be fixed, with US congressman Richard Neal commenting: “I have on this delegation people who are experts at trade and they also would confirm that they think these issues on the trade front, if that’s really the dispute, could be ironed out quickly.”

With the latest set of data showing the UK’s trade deficit has widened in March, experts are warning that local exporters shouldn’t be taken for granted as international trade networks come under strain. 

The number of exporting firms in the UK dropped by 3% in March, with the number of employees working in export-related jobs also falling by 5.5%. 

Total export revenues also fell by almost 4%, with Wales seeing the biggest decline. 

The big-picture data isn’t too much better either with the UK’s trade deficit rising by almost £15bn to £25.2bn in Q1 2022 with imports rising 10%. 

However, HMRC has urged caution on analysing the data and applying it to the business world as it has recently changed its methodology for collecting trade data. It’s also worth taking into consideration that this data set is the first since UK sanctions on Russia began in late February and March. 

Commenting on the latest results, director-general of the Institute of Export & International Trade, Marco Forgione, noted: “The message is simple, don’t take UK exporters for granted. They rely on their international networks for their trade – and those networks are under severe strain.”

Read more: UK SMEs seeing core EU markets vanish

He continued: “While the supply chain crisis continues, the Russian invasion of Ukraine adds uncertainty to an already complex trading picture. Relationships are fragile and UK exporters need help, support and guidance to get them through these difficult times.

“We reiterate our commitment to supporting businesses of all sizes through these turbulent times. Education is an essential tool to ensure UK exporters have the expertise to trade effectively, sustainability and competitively.”

The ongoing crisis in Ukraine has highlighted just how interconnected the world’s economy is. As with the pandemic, humanitarian, political and environmental shocks in one region can affect the global markets on a wide-reaching scale. 

These five stats highlight the extent to which the war in Ukraine is impacting world trade. 

Trade value sinks

Almost all major trade zones have seen a fall in value, predominantly due to the sharp drop in container ship traffic from Russia. 

Keil Institute for the World Economy found through tracking shipping data that Russian imports are down nearly 10% whilst exports fell 5%.  In the EU, exports fell 5.6% and imports by almost three and a half percent. 

The US has seen falls too, whilst China has been the least affected with exports down 0.9% and imports actually increasing by the same amount. 

Inflated shipping costs

UNCTAD has warned that a prolonged invasion of Ukraine could see freight rates inflate to levels that would adversely affect economies and drive up prices even higher for consumers. 

They noted in a report that: “Black Sea-Med aframax and suezmax tanker earnings have jumped from about $10,000 a day on February 18 to more than $170,000 a day on February 25. The underlying freight costs have increased by about 400%.”

Trade routes have become more complicated through restricted air spaces, as well as government sanctions on Russian planes entering EU airspaces. 

Food prices could rise still further

Whilst many economies struggle to slow inflation growth, numerous world organisations have warned that food prices could rise further and adversely affect poorer households. The Economics Observatory has already reported that food prices have increased since the start of the year, as high as 24% compared to 2021. 

Closer to home, the rising cost of food has seen prices increase by 4.3% – the highest for over 10 years. 

Slowing growth in the Asia-Pacific region

Sprightly economic growth following the mass relaxation of pandemic restrictions has now slowed, with China in particular expected to see expansion 0.4% lower than expected before the invasion. Worst-case scenarios are pitching China’s total economic growth at just 4% by the end of the year. 

Key for organisations including the World Bank though is the impact on poorer and developing nations, especially within the East Asian and Pacific trading zones, where recent global economic shocks could lead to increased poverty. 

UK exporters facing difficulties too

Closer to home, importers and exporters in the UK have seen a dampening effect on global trade too, with revenues activity and revenues rising by just 2-3% – half what was expected just two months ago. 

Read more: The Expert Exporter: How do you find the right international distributor?

Coriolis Technologies chief executive Dr Rebecca Harding said that: “Since 2020 there has been a general drop in exporter activity and so seeing the expected post-Covid rebound fall flat offers little hope for growth as global geopolitical risk heightens. 

“Our data has been indicating a decline in exports and exporters since last year, and our forecast is for further downside risk because of sanctions and uncertainty in the wake of the Russia-Ukraine crisis.”

The debut report from the Global Britain Commission has suggested how embracing ‘global Britain’ could deliver a £474 billion economic boost through increased export activity. 

The commission, led by former trade secretary Liam Fox, brings together some of the UK’s leading businesses to help make a success of Brexit, and drive the government’s global agenda. 

Released just four months following the commission’s launch in October last year, this first report covers a range of areas including what ‘global Britain’ means, why it matters and analysis of the size of the prize for local firms and the economy as a whole. 

Key takeaways include:

• Raising per capita exports of goods and services to the level of Germany would mean an additional £474bn of UK exports annually.
• This £474bn export boost could create up to 5.5m export-supporting jobs with a 7% higher-than-average pay. 
• The US has the 19th highest rate of outward FDI per capita in the OECD. Raising this to match France’s level would equate to an additional £33bn of FDI outflow per year. 
• The UK would see an extra £61bn of R&D investment if investment levels per person were raised to that seen in South Korea, supporting 1.9m jobs in the process. 
• Raising the UK’s per-person venture capital investment levels to that of the US would be equivalent to an additional £19bn of VC funding each year. 

You can read the report in full here.

In his introduction, Dr Fox noted that: “The UK remains one of the world’s top destinations for inward investment for well-defined reasons; a well understood and respected legal system; a skilled workforce with relatively (at least in a European context) liberal labour laws; some of the world’s top universities, open to business collaboration; a stable regulatory environment; moderate taxation policy; a vibrant tech sector; good IP protection and a creative and innovative environment for business start-ups.

“All these elements form a sound basis for future prosperity if we take full advantage of these factors and develop our competitive advantages further. As a huge services producer and exporter, we offer many of the products that developing countries will require to develop their economic and social capacities.”

A winning export strategy for your business

At Go Exporting, we help ambitious businesses to open a world of opportunities through exports. Learn more about how we can help you develop an export strategy here.

For more expert insights and analysis on everything from finding the best export market for your product to preparing for  your export journey, sign-up to our Expert Exporter resource hub.

The UK has begun discussions with India over a free trade agreement at an event held earlier this month in New Delhi. 

International trade secretary Anne-Marie Trevelyan met with her counterpart Piyush Goyal to formally begin talks on a deal that would support access for UK firms into one of the world’s largest and fastest-growing economies. 

India is set to become the third-largest economy on the planet by the middle of the century with a population larger than the UK and US combined, with a growing middle class, that could help boost trade by up to £28 billion by 2035 and increase wages by £3 billion in the UK – supporting nearly 100,000 jobs and doubling current UK exports to the nation. 

A free trade agreement with India would also be a big step forward in the UK’s ambitions to refocus trade on the Indo-Pacific and potential membership of the Asia-Pacific trading block. 

Ms Trevelyan said of the potential FTA: “A deal with India is a golden opportunity to put UK businesses at the front of the queue as the Indian economy continues to grow rapidly. By 2050 India will be the world’s third-largest economy with a middle class of almost 250 million shoppers.

“We want to unlock this huge new market for our great British producers and manufacturers across numerous industries from food and drink to services and automotive.”

Read more: UK trade deficit with China trebles

“As an independent, deal-making nation the UK is broadening our economic horizons and forging stronger partnerships with the fastest-growing economies of the world. India marks the start of our ambitious 5-star year of UK trade and will show how the deals we negotiate will boost the economies across all nations and help level up all regions of the UK.”