UK Weekly Economic Briefing: 03 Feb 2012

During the past decade, the UK has continued to lose market shares in world trade markets, with an acceleration of this trend during 2008-2010. While exports by other developed economies have also underperformed, some countries such as Germany have been able to increase their market shares during this time. Within overall exports, while the UK's services exports have performed well, goods exports have underperformed. We find that while worsening competitiveness has played a role in the earlier part of the decade, the geographical focus of UK exports, with a relatively small presence in the fastest growing markets, has been the main factor behind the UK's exports' underperformance. A better orientation towards strong growth markets could have raised exports of goods by around 10% by 2010, which would have lifted GDP by around 1% or close to £15 billion. In addition, we find that the UK's goods exports have underperformed compared to what their geographical focus and competitiveness would have suggested. We attribute this to a suboptimal presence in the goods most in demand, in particular machinery equipment that emerging markets heavily purchased over the last decade.