international 15
Exporting our way out of recession
It sounds like a plan. Seize the moment while sterling is weak and boost income to the nation’s coffers, in this, our
hour of need. But it takes more than fine Churchillian sentiments to sell goods abroad, writes Richard Willsher
The plan itself was set out in the
third report from the Business,
Innovation and Skills Parliamentary
Committee published on January
12 entitled “Exporting out of
recession.” This resulted from
the Committee’s enquiry begun
in February 2009. One of the
highlights of the enquiry was the
submission of Lord Jones, formerly
leader of the Confederation of
British Industry (CBI). He said: “I
will tell you that the only way this
country is going to get out quickly
is to trade its way out of it. If Britain
was a company I would be saying,
‘The fundamentals are okay, you’re
not going to go bust, but this is
going to be bloody’."
The report’s recommendations
listed 22 different areas and
initiatives from the public sector
that together would create an
"export culture". Among these,
UK Trade and Investment and the
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were praised for their work but the
gist of it was that they and other
areas of government could do
more.
overall trading performance is not
strong enough...”
There have been some causes for
optimism however. The first is that
sterling has weakened further. As
of March 8, it stood at 1.50 to the
dollar and at 1.10 against the euro.
A month earlier a survey from the
CBI revealed: “Small and medium-
sized manufacturers are starting to
benefit from the relative weakness
of sterling, with overseas orders
stabilising after seven quarters of
decline ...”
Further, a European Business Trends
report compiled by BDO LLP found:
“The weak pound has fuelled the
UK’s export market to such an
extent that British exporters are
more confident about future export
growth than their counterparts in
the Eurozone ...”
However as exporters have been
telling us in the course of compiling
this international trade feature, one
weak currency doth not an export
recovery make.
A key misunderstanding is that
exporting to the BRICs and other
emerging markets is the great
panacea. In fact UK exports to
Brazil, Russia, India and China,
though they are growing fast, do
not account for much of the total.
In the region of 75% of UK exports
are sold to Europe and North
America. That leaves a relatively
small proportion to the rest of the
world.
Another consideration is the fact
that battered businesses need
to recover their own balance
sheets. As the BBC’s economics
editor Stephanie Flanders points
out in her “Stephanomics” blog of
February 23, exporters are likely
to be more inclined to earn fatter
margins when they can rather
than cut prices to boost sales. That
makes good, more profitable,
business sense.
Looking into the future, the big
question mark hanging over UK
trade is what will happen after
the election. Though shadow
chancellor George Osborne
mentioned “exports” three times
in his February 24, Mais Lecture
at London’s Cass Business School
there was no substance or detail.
“We have to move to a new model
of economic growth that is rooted
in more investment, more savings
and higher exports,” he said, but
this sounds more like the starter to
an A-level economics question than
a policy statement.
What is clear from speaking
to exporters is that instead
of bluster and vague political
statements, exporting our way
out of recession is all about real
companies selling real goods and
working the hard yards to their
overseas customers’ doors. That
is what our export success stories
demonstrate. Yes the weakness
of sterling is helpful but it is by no
means the whole story.
Many companies with overseas  


 

sales also have to shoulder 
WORK MORE EFFECTIVELY
But even if all the suggested
initiatives were to be put into
increased input costs, for example
from buying components or raw

ANYONE, ANYWHERE
action they wouldn’t bear export

fruit overnight. And it is worth
remembering that though the
pound remained weak for much
of 2009, the huge trade in goods
deficit in November of £6.8
billion had worsened to £7.3b
by the end of the year. Things
had not it seems improved much
by early February when David
Kern of the British Chambers
of Commerce was quoted in
London’s Evening Standard as
saying: “Given the favourable
international environment
for British exporters, with a
competitive sterling exchange rate
materials priced in dollars. The
second issue is that if they are
pricing their goods in sterling it is
not easy to simply hike prices. Our
largest trading partners, the EU in
particular, have problems of their
own to wrestle with. Invoicing in
euros or dollars is more beneficial
as it disguises the currency gains
made by exporters when they
translate those currencies into
pounds. But as exporters will tell
you, it’s swings and roundabouts.
Over time margins can be richer
or tighter, you have to go with the
flow to an extent and maintain
reasonably stable prices in overseas



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THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2010 www.businessmag.co.uk