News headlines are full of the damage the Coronavirus is doing to the UK. Headlines talking about infection rates, the R rate and the recovery rate sit alongside headlines about the suffering experienced by small businesses and the damage to the UK’s economy. This raises obvious questions about how the UK could head off or at least minimize a recession. Exports might be at least part of the solution.
Getting the UK back to work
Goods have to be produced before they can be exported. This means that companies can only start making firm plans for export once they have their workforce back to an operational level. In principle, this should be fairly soon as Prime Minister Boris Johnson has just announced that people who cannot work from home, such as those who work in manufacturing, should be “actively encouraged” to go back to work. Their employers will be required to implement measures to protect workers from COVID19.
In practice, getting the workforce back together may be more complicated than the announcement makes it sound. Possibly that is why Mr Johnson used the word “encouraged” rather than required. With schools expected to be closed until at least June and social-distancing measures still very much in place, it could be difficult for parents to return to work unless employers can provide some form of assistance with childcare.
Getting freight moving
Similarly, exports depend on the freight industry and, right now, this is in something of a state of disarray. Sea freight is a slow-moving sector (in every sense of the phrase). This means that any disruption can take a long time to clear, particularly when different countries are in different stages of response to COVID19.
For example, China had the first lockdown and is currently getting itself back into “business as usual” mode. The U.S. and Europe locked down much later and are now only just starting the process of easing themselves out of it, and India is still very much in it.
Air freight depends on passenger flights, which are extremely limited just now. This means that any available space commands premium prices. Rail freight, although still working fairly well, does not have sufficient capacity to replace sea freight. This leaves road freight. At present, this is massively overburdened, but part of the reason for this is administrative.
In short, while roads may currently be, if not empty, then at least very quiet, the benefits of this are vastly outweighed by the issues crossing national borders. The shorter the distances between those borders, the more serious these issues become. Added to this, there is the fact that not only are freight drivers at risk of exposure to COVID19 but they are also subject to onerous quarantine requirements and it’s easy to see why freight drivers might be put off making any more trips than they feel absolutely necessary.
Hopefully, industry bodies and national governments (both within and outside the EU) can work together to address these issues as it’s in everyone’s interest to get the global economy moving again.
Getting goods overseas
The exciting news is that if these issues can be addressed (which is entirely possible), the UK may have significant potential for export just waiting to be tapped. According to the National Survey of Registered Business’ Export Behaviours (NSRB), 13% of UK businesses have not exported goods but believe that they have goods which are suitable for export.
What’s more 66% of exporters operate on a “passive” basis. In other words, they are happy to take orders which are sent to them but do not actively look for export opportunities. In fact, only 28% of exporters actively look for international buyers.
Last but not least, the Brexit situation has kept the Sterling weak. While this has its drawbacks, it is good news for exporters as it makes Sterling-denominated prices more attractive to the international market.