The UK’s history of exports is long and illustrious, involving a variety of goods such as steel, textiles and ships. In fact, Britain was once the leading exporter of goods across the world. While this is no longer the case, the UK still has a big part to play in global trading.
According to HMRC, the most popular British goods sold overseas are machinery, vehicles and semi-precious stones. The UK also exports professional services in the information and communication sectors.
In 2009, for example, the UK’s trade in goods suffered a significant slump as a result of the global economic crisis. This was followed by a steady increase in both imports and exports which lasted until 2012. From 2013, imports remained relatively flat but increased sharply in Q3 2016. Exports peaked in Q2 of 2013, with an additional peak in Q4 of 2016.
Of course, Brexit dominated the headlines and onward. Despite the falling pound, growth in exports has only increased marginally. If we consider the latest figures from HMRC: over the course of 2017, exports increased by 2.5%, imports increased by 5.7% and the trade deficit widened by 14%.
What happens in the wider political world has an enormous impact on the UK’s small businesses. To better understand this impact, we looked at anonymised, aggregated data drawn from hundreds of thousands of Xero’s subscribers in the UK and consolidated the findings.
The impact of Brexit on imports
Leading up to the Brexit referendum in June 2016, our data revealed increases in import growth rates. The year-on-year (YOY) growth rate in April 2016 was 30.58%.
On the day of the referendum itself, Thursday 23 June 2016, sterling hit a 31-year low. Economists would argue that a falling currency results in cheaper exports and more expensive imports. Thus, imports decrease, and exports increase.
There was little fallout from Brexit. The UK economy as a whole performed better than expected in the six months following the referendum. In fact, in August 2016 import growth rates reached a record high of 62.25%.
However, throughout 2017, economic growth started to slow owing to inflation rises, and correspondingly, decreased consumer spending power.
Interestingly, those small businesses that use Xero reported positive YOY import growth through 2016, and in fact up until December 2017. The highest YOY growth rate in 2017 was tracked in May 2017 - up 57% from the previous year. However, this was short-lived, as it slowed back down again by July 2017.
One explanation is that, after the vote for Brexit, we start to see more small businesses trading outside of the European Union (EU), and exploring wider international markets.
UK small business plans beyond Brexit
As of June 2017, the UK’s export growth rate has experienced steadier growth per month YOY than the corresponding import growth rate. This trend has been consistent since May 2016, which is certainly a positive sign.
“It’s impressive to see that small businesses in the UK are not letting economic uncertainty hold them back”, says Edward Berks - EMEA Director, Fintech & Ecosystem at Xero. “In fact, many are identifying new opportunities in the global market to sustain business growth.”
Brexit is still part of newspaper headlines, and it still presents uncertainty. Notwithstanding the challenging economic climate, growth has been positive for both UK exports and imports. The country’s small businesses are clearly finding new ways to do business.