A rise in demand for UK service exports and a rush for gold helped fuel a partial recovery in the UK’s trade performance, according to new research.
A report by the Resolution Foundation, entitled ‘Open for Business?’, found two-fifths of the growth in UK goods exports in the second half of 2022 was down to a ‘dash for gold’ by China, Hong Kong, Switzerland and the UAE.
Gold sales helped flatter Britain’s export performance as global central banks sought precious metals as a safe asset, reports the Times.
Beyond this, the UK’s goods export performance remained weak, with goods exports still 10.7% below pre-pandemic levels, according to the report.
Services
The report found that there had been promising growth in the exports of services such as banking, travel and education.
The UK is the second largest exporter of services in the world after the US and recorded the strongest performance in services exports in the G7 between Q4 2021 and Q4 2022.
UK services exports were 15% higher in 2022 with strong global demand for the services that the country specialises in.
The UK also increased its global market share in both travel and other business services such as advertising, legal services and R&D.
Sophie Hale, principal economist at the Resolution Foundation, said: “Britain’s army of accountants, artists, consultants, and educational institutions are a success story that politicians rarely celebrate. But they hold the key to stronger growth in the decade ahead.”
Business optimism
The export news comes as multiple data points show an improving economic outlook for the UK.
Data from the Office for Budget Responsibility last week showed a surplus rather than an expected deficit in public finances, helped by the strongest January income tax revenues since 1999 and buoyant corporation tax income.
The latest S&P Global/CIPS flash composite purchasing managers’ index also showed British business activity rebounded in February after six months of declining.
More than three-quarters of business leaders are confident about their companies’ prospects in 2023, according to a new survey published by the Boston Consulting Group.
Reuters also reports consumer confidence in February reached its highest level in almost a year.
GDP
Analysts are forecasting a smaller contraction in output than they had previously because of falling energy prices and better-than-anticipated business and consumer sentiment, reports the FT.
GDP was expected to drop by 1% in December and January, according to a poll of leading forecasters.
However, the data for the week of 20 February found economists upgrading their forecasts to a 0.6% fall in GDP in 2023.
Yesterday, JPMorgan became the first major bank to predict that the UK will avoid an economic recession, according to Bloomberg.