Exports can rebalance the economy
Gateways to growth
The UK’s decision to leave the European Union is a historic moment for the country. While some have been quick to interpret the result as a rejection of globalisation and free trade, others point to the opportunities that such a rupture presents. Government should see this break from the status quo ante as a unique chance to address the major imbalances in the UK economy, both regionally and in terms of the balance of trade.
Despite a proud history of international trade, in recent times the UK has fallen behind other major economies. In 2016 the UK ranked ninth as an exporter of goods, just ahead of Belgium and behind China, the US, Germany, Japan and the Netherlands. On the other hand, the UK had the fourth largest share of imports. As a result the UK’s balance of trade in goods ran at a deficit of $183bn. This is in part a function of the diminished role of manufacturing in the UK economy, accounting for just 10 per cent of GDP compared to 23 per cent in Germany. Fundamentally, the UK no longer makes enough products which the rest of the world wants to buy. A bold industrial strategy with a focus on boosting manufacturing and exports can help to address this, and the nation’s ports have a key role to play.
The UK’s ports form part of often complex supply chains that stretch across the globe, connecting British businesses and manufacturers to international markets. Ports handle 95 per cent of the UK’s trade in goods by volume and in doing so support jobs and economic growth across the country. It is therefore crucial that this trade can continue to flow and grow. The quality of road and rail links to ports has an important part to play in encouraging trade, both by enabling access to markets and by improving the relative competitiveness of the UK’s manufacturing base. The government’s approach to transport infrastructure investment should take into account the economic benefits of increased trade and deficit reduction and make this a strategic priority.
The potential for ports to increase international trade is not limited to ensuring the efficient movements of goods. Many of the UK’s ports, including Hull and Port Talbot, offer large areas of development land with excellent landside and marine access. These ports are ideal locations for the import of components or raw materials and the export of finished products. This represents a major opportunity to attract investment in new export-led manufacturing which can help rebalance the economy. A policy to establish Free Ports, or Free Trade Zones, could help to realise this opportunity by attracting investment and encouraging domestic growth. This has the potential to further enhance the ability of ports to drive increased trade and economic growth.
Given that major UK ports are located across the country, these policies can also promote regional economic growth and support efforts to tackle the regional imbalances in the economy. A clear contributing factor to the referendum result was the sense that many communities across Britain felt left behind by the process of globalisation. This pattern is particularly apparent in communities around the nation’s ports, with 17 of the UK’s 30 largest ports currently in the bottom quartile of local authorities when ranked by the ONS’s Index of Multiple Deprivation. Policies designed to bolster trade and drive investment in ports therefore offer major benefits to areas of relative economic deprivation.
Rebalancing the economy will require close collaboration between government and industry. To succeed, this approach will also need to stretch across departments and policy areas, from transport and infrastructure to energy and environment. An overarching Trade First Review of wider policy with the objective of increasing trade and encouraging exports would help to guide future policy decisions. This would also provide a framework for identifying which pieces of European legislation the UK should retain, improve or remove after the EU Withdrawal Bill is enacted. The role of new technology such as autonomous vessels and vehicles should also be taken into account when considering how to improve efficiency in the supply chain and connectivity to international markets.
An industrial strategy focused on trade has the potential to stimulate economic growth and prosperity across the UK. As facilitators of trade and hubs for wider economic activity, the nation’s ports have an important role to play in achieving this ambition.
Brexit Britain: the future of industry is a publication which examines the future of UK manufacturing through the prism of the recently released Industrial Strategy White Paper. The report features contributions from the likes of Greg Clark MP, Miriam Gonzalez, Richard Graham MP and Frances O’Grady.
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