A new study from the Boston Consulting Group (BCG) has found that trade’s importance to the UK economy could decline over the next decade.
The consultancy found that UK trade is set to grow by 0.7% per year between 2023 and 2033, outpaced by wider GDP growth of 1.6%. The forecast for average global trade growth is 2.9%.
“If you are a country like the UK’s historically been, that sees the growth that comes from trade as a key component of your economic model, you don’t want to be in a situation like that,” Tim Figures, a partner and associate director at BCG, told the Times.
‘Global Britain’ hopes dashed
Partners said that Brexit was “clearly having an impact” but wasn’t the only factor leading to trade’s declining importance in the UK economy.
“There seems to be challenges with the UK’s trade levels with a whole range of economies beyond the EU,” he said.
“The UK’s vision, post-Brexit to be a global trading power, trading with everybody, is a bit reliant on increased globalisation and that’s a trend that is increasingly going into reverse.”
Other trading partners affected include China, with which the UK is expected to see a 2.3% annual decline in bilateral trade, as supply chains reorient themselves over the coming years, according to Bloomberg.
The study also predicts that UK-US trade will be affected by tariff rises – something that incoming president Donald Trump has pledged to implement for all countries.
New strategy needed
Grace Thompson, UK public affairs lead at the Chartered Institute of Export & International Trade, said that the BCG study is “sobering” and showed the importance of the upcoming trade and industrial strategies.
“If the UK economy is to grow at a faster rate, we need to reverse the projected trade stagnation and fast,” she said.
“Businesses which grow internationally have been repeatedly found to be more productive and sustainable, and contribute more to UK economic growth. It’s imperative that we find ways to support businesses of all sizes to be able to engage in exporting across the globe with fewer friction points.”
“The government has an opportunity to address the challenges raised in the BCG study in its upcoming trade and industrial strategies, particularly as both of these can provide both a long-term vision and a sense of priorities for the future.
Manufacturers agree
The country’s manufacturers agree with Thompson that the long-term industrial strategy is key to the government’s mission to grow the economy. A majority (57%) of firms polled in a survey by Make UK, a membership body for manufacturers, said that the strategy should lead to increased investment.
“The pressure on the incoming Industrial Strategy will now be even greater to set investor confidence on a path to growth,” the body said, according to the FT.
However, the survey also found that many firms are looking to cut costs and raise price due to ongoing inflationary pressures and increased taxes introduced in the government’s Autumn Budget.
“This will be painful for both their customers and for their staff,” Make UK added.