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Despite 7% rise, Q2 export sales remain low

Author: ICAEW Insights

Published: 19 Jul 2021

A slight uptick in export sales has been overshadowed by a ‘historically high’ fall in sales to EU customers, with B2C exporters losing out more than their B2B counterparts.

The British Chamber of Commerce’s Trade Confidence Outlook for Q2, released Friday 16 July, showed that exporters still face significant issues after a historically weak Q1. 

The survey of more than 2,800 UK exporters revealed that the percentage of firms reporting increased export sales had risen to 27%, a seven-point rise from the previous quarter. However, the percentage of businesses reporting decreased export sales fell to 28%, down from 41%, which remains a historically high proportion. 45% reported no change in their export sales.

Responding to the findings, Head of Trade Policy at the British Chambers of Commerce, William Bain said: “Six months into the new trading relationship, more than a quarter of goods exporting firms are experiencing continued falls in sales to EU customers. This is a historically high number.

“Our exporters are among the best problem-solvers and innovators in our economy, and yet our data demonstrates they are still struggling mightily to resolve the issues that they currently face.”

The percentage balance data shows that the proportion of firms reporting increased export sales has recovered slightly, after taking a downward turn in Q1. The balance of manufacturers reporting increased overseas sales was up to +8% from -9%, while the balance of services firms reporting increases rose to -7% from -26%. Overall, 35% of manufacturing exporters surveyed reported increased overseas sales in Q2, with 27% reporting a decrease and 39% reporting no change.

B2C exporters are losing out more than B2B

The breakdown of services between B2B and B2C exporters reveals that a considerably larger proportion of B2C exporters are seeing a fall in overseas sales - 38% of B2C exporters surveyed reported a decrease in export sales, in comparison to 21% of B2B firms. The proportion reporting increased sales was similar between B2B and B2C, 23% and 22% respectively, for B2B this represents an 11-point fall from 34% reporting increased sales in Q1. While 55% of B2B firms reported sales staying constant in comparison to 40% of B2C businesses. It should be noted that these numbers come on the back of historically high proportions of both B2B and B2C firms reporting decreased sales in the previous quarter, 31% and 51% respectively.

Across a number of metrics, including domestic sales, confidence and expectation of workforce growth, exporters were more likely than non-exporters to report rises. This ties with historical data showing exporters as more likely to display confidence as they push into new markets or develop new products. Given that the recovery in overseas sales continues to lag domestic sales by a significant margin, it can be seen that despite being dynamic businesses exporters are still struggling to grow sales in the face of the issues currently affecting trade.

Lawrence Brown, Chairman of UK-based Royston Power Generation Ltd, said: “Export sales for Royston have slowed down since the pandemic started in 2020 – mainly as a result of Oil manufacturing countries putting back some of their capital development plans; and especially for service-based work – where the extra costs of sending a squad of engineers abroad to carry out work for customers has been prohibitive due to additional quarantine costs. The impact of Brexit on supply chains has caused delays to both UK and export sales.” Brown is also a member of ICAEW’s Business Committee and ICAEW’s Exporting Community Advisory Group.

Brexit remains a dominating factor

Respondents cited issues arising from Brexit as the main cause of difficulties with export sales in the quarter. Many pointed to ongoing issues with the TCA, increased red tape or costs and losing EU based clients or customers to the perception that trade was now simply too difficult or complex.

Manufacturers need the UK government to work with the EU to ensure greater cooperation on customs procedures, creating systems for single digital submission and enhanced trusted trader schemes, Make UK said. “While opportunities are opening up elsewhere, the EU will remain our biggest trading partner through sheer fact of geography,” the organization’s chief executive Stephen Phipson pointed out.

Looking ahead to 2022, when UK import controls are introduced across Great Britain, Phipson said: “With major changes coming down the track, especially the imposition of import controls, it’s vital that the government works with business and the EU to smooth out critical issues such as customs procedures. Otherwise, there is a risk that the drop in exports to the bloc we have seen over the last couple of years will become structural and permanent.” 

Follow this link to the British Chambers of Commerce Trade Confidence Outlook for Q2 survey.