HSBC Study Finds Imports Key to UK Export Growth
Imports are increasing the UK’s productivity and export potential, supporting the country’s economic and business growth, according to newly-published research by HSBC.
The banking group’s
‘Importing for Export Success’
report finds intelligent importing is helping UK businesses succeed at the higher value-added end of the global supply chain, particularly in the key export sectors of industrial machinery and transport equipment.
“While there are concerns about the UK’s trade deficit, this research shows that imports used in the right way benefit UK businesses and the overall economy by boosting productivity and driving export growth,” said Alan Keir, chief executive (CEO) of HSBC Bank.
“Far from being the enemy of UK manufacturing, they are the overlooked ally of many smart businesses. This report both celebrates businesses that are embracing intelligent importing and highlights the need to continually innovate to stay ahead.”
With the UK expected to be the fastest-growing of the main G8 economies in 2014, the report forecasts positive growth in total UK merchandise exports of close to 4% a year in 2014-15, rising to 6% a year during 2016-20. Equivalent import forecasts are almost 5% a year in 2014-15 then just over 5% per annum to 2020.
The report draws on the HSBC Trade Forecast outlining how 50% of the UK’s total export growth to 2030 will be driven by two sectors – industrial machinery and transport equipment – which are also expected to account for over 30% of the growth in imports by 2030, with manufacturing imports coming from an increasing range of foreign suppliers while British businesses focus their efforts on adding value to semi-finished products before exporting them.
This behaviour is increasing the UK’s productivity. Drawing on research from the Organisation for Economic Cooperation and Development (OECD), the report shows that between 6% and 12% of the increase in UK manufacturing productivity between 1998 and 2008 can be accounted for by an increase in imports as the world went through a period of rapid globalisation. Even after these gains, the report forecasts that between 4% and 7% of the increase in UK manufacturing productivity over the next 10 years will be facilitated by increased imports of intermediate goods.
“By importing component parts to enable us to be more efficient, our skilled workforce and capital is focused on areas where we can compete and stand out from other nations,” says Keir. “UK businesses need to ensure they are importing the right goods at the right point in the supply chain in order to maintain competitiveness, establishing a clear position in the global supply chain where they can best add value to drive growth.”
The report highlights the evolution of manufacturing in developed markets where value is added at multiple stages around the world, wherever it is most efficient to do so. For example, the share of pharmaceuticals in total UK imports has significantly increased over the past 10 years, with British pharmaceutical companies benefitting from raw materials imports and then adding value to products before exporting them.
Spotlight on Transport Equipment
The report highlights the recent British success story of the UK’s car manufacturing industry, which has rebounded strongly following a long period of restructuring. The forecasts indicate that UK car manufacturers will be able to build on their recent success with further strong growth in exports over the next 10 years, helped by high levels of innovation and research and development (R&D).
Car manufacturers in the UK often source parts and components, such as castings, from lower cost suppliers in Asia and Latin America. UK manufacturers specialise instead in vehicle production and engine manufacturing, toward the top of the auto supply chain. Creating a specialist hub to serve European markets is benefiting the economy, with exports of both finished vehicles and engines having increased sharply since the global financial crisis.