Common themes on required change but little sign of progress to date.
There have been a range of reviews of export performance in recent years by UKTI, the NAO, the political parties, the CBI and most recently the Cole Commission. While each study has a particular focus, there are a number of recurring common themes. In many cases these also reflect the content of the discussions EY and BCC have had with our contacts in the market.
In broad terms, the areas that businesses have identified as requiring action to remove barriers to increasing exports are:
- Strong leadership and co-ordination by Government of all policy initiatives potentially impacting exports and a clear lead in improving access to fast growing emerging markets, in recent years this has centred on the BRICs, a focus that also requires review given the forecasts discussed in my previous blog;
- Support from Government in providing information on market opportunities and market access with a strong view that this is especially important for SMEs;
- Better export finance arrangements although the detail often requires clearer specification;
- Improvements in education and training with languages and STEM skills being the highest priorities;
- Investment in infrastructure, especially airport capacity and roads; and
- Less regulation of export markets, though this seems to be more related to international market access than to the UK itself.
Supply chain issues are also raised on a regular basis although the solutions do vary between studies. The Cole Commission alluded to the need for ‘industrial policy’, and generally the request seems to be for Government to play a role in strengthening the domestic component of supply chains. There has been some activity on this front with the creation of ‘catalyst’ centres and the ‘reshoring’ initiative but EY’s research on Reshoring suggests there is significant potential to exploit a changing global landscape, but this will require more support and direction from Government to incentivise investment in both capital and labour. This would fit well with the devolution agenda, offering the scope to create clusters across the UK. As discussed above, a greater domestic share in value chains should also increase flexibility and control for businesses.
Looking at export performance, the studies and recommendations made to date, while well-intentioned, have had at best a very limited impact on export performance. Our analysis suggests that there may have been something of a fixation on the BRICs but there was limited attention given to articulating how the UK might succeed in these markets given the difference between the type of demand in these countries and the UK’s product portfolio. With a changing growth outlook, there is an opportunity to match the UK’s capabilities more closely to the expected opportunities.
EY’s suggested agenda for improving export performance
The clear message from the analysis summarised in this blog and the two preceding it, and set out in detail in the supporting report, is that being able to identify the most attractive markets and to move flexibly to exploit these opportunities are the key drivers of export success. An important part of building agility will be to continue to enhance the UK’s obvious strengths such as in services but also to build more domestic capability in selected opportunity areas with manufacturing being of sufficient potential scale to merit serious consideration.
If we accept this finding, then for proposals for change to have a chance of making an impact, they must be developed with this market focus in mind and be as specific as possible, with a clear articulation of how change will feed through into improved export performance.
On the basis of the preceding discussion, we have identified a number of priority areas for potential action to improve UK export performance. These are the areas we suggest we use as the basis for discussion.