UK Hopes for Export-led Recovery Boosted by Trade Data
March marked the first increase in trade confidence since November 2010, according to the Travelex Confidence Index. Confidence lifted as UK importers and exporters took comfort from the Chancellor George Osborne’s ‘growth budget’ and his declaration that ‘Britain is open for business.’
Just over half (52%) of British exporters and importers believe that the recovery of the UK economy will now be led by export; a figure that has risen 7% since February – the highest it has been since June 2010. Eighty-five percent also believed that the current economic growth is sustainable; an increase of 11% since February. Nearly two-thirds believe that access to credit is fairly easy, the highest it has been since September.
In terms of the Expectations Index, March also saw a 2% increase (58%) in the proportion of businesses who believe trade conditions will improve over the next 12 months, as well as a 3% rise in the number of importers and exporters expecting to see an uplift in business over the next six to 12 months (64%).
David Sear, global managing director at Travelex Global Business Payments, said: “The Chancellor offered a ‘budget for business’ and it has clearly captured the imagination of UK importers and exporters. The optimism they expressed in March has allowed us to reverse some of the confidence losses we have seen since November.
“Positive signs from January and February’s UK trade data may help to boost confidence but it is clear that there are still significant short term risks, including rising fuel costs and staff wage demands,” he added.
The release of the Consumer Price Index (CPI) surprised markets, as it dropped in March to 4%, down from 4.4%. The data release led to an immediate weakening of the pound against the euro and dollar, plummeting to a five and a half month low of €1.1266 against the euro, and tumbled half a cent against the dollar to a one week low of US$1.6240.
Inflation remains a key source of concern for UK importers and exporters, according to the Travelex Confidence Index. In March, three in five said that rising inflation was damaging their business and impacting their competitiveness abroad. Sear said: “Before the budget, the cost of fuel was the number one source of concern for British importers and exporters. Wage demands also remain a source of anxiety.”
The Travelex Confidence Index was bolstered by other indices that also increased: