A new report from the Ernst & Young Item Club suggests UK companies and the Government should focus export strategies on the emerging BRIC economies.
The report – The outlook for UK exports – estimates that the value of UK goods and services sent to Brazil, Russia, India and China could increase by 11.7% each year until 2020. This is because a 14 per cent annual rise in the average household income in those countries should fuel increased consumer spending. Electrical goods, optical and high-tech goods, and minerals & metals are predicted to be the biggest benefactors of this.
Total UK exports to all countries will increase by 8.5% per year over the next 10 years, the report says.
At present, only five per cent of UK goods and services sent abroad land in the BRIC countries and the Item Club says Government needs to act if the potential for increased business with the four is to be realised.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, says: “The government has an important role to play in facilitating the re-orientation of exports towards emerging markets and breaking down the regulatory barriers for companies that wish to break into those countries by developing strong relationships with their governments.
“Government policy should also be focused on supporting competitiveness through improving skill levels and providing incentives to invest, which would help to close the productivity gap with Germany.”
Exports are currently being driven by the weak value of the pound and while this is set to continue in the short term, Goodwin warned that it is not a long term fix.
“The UK needs to be looking to the lessons learned from Germany, which has consistently achieved greater improvements in competitiveness than the UK, if it is to become a major player in export markets over the longer term.”
The report suggests that export growth will contribute around 0.5% a year to GDP growth over the next five years.