Export or Die

“Export of die” was the government edict to business after the Second World War. On current trends, we might just live: demand for our goods from strong countries could yet bale out our own economy.

Britain has not had a trade surplus since 1983 and that’s hardly about to change now, but exports of goods rose by £1.3bn in January 2011 and imports fell by the same amount. That significantly closes a gap that has been running at about £8bn a month.
The UK came close to balancing its payments in 1997 but imports soon bounded up again with exports failing to match. The trade gap is now about 1 per cent of gross domestic product – much less than the 5 per cent at the end of the 1980s – but that is roughly equivalent to the whole growth in the economy.

Exporting is not easy. That’s why we ask Prince Andrew to fly round the world buttering up dictators and despots to buy our goods. And when the domestic economy is booming, it is tempting to take the easy option and sell at home rather than slog round foreign markets.
But Britain’s home demand – especially from the public sector - is now weak and desperate manufacturers are realising that they must make the effort and try to sell abroad. The good news is that there are some countries doing better than Britain and their domestic demand is sufficient to include buying our exports.

A relatively weak pound helps – but an increase in UK interest rates might erode that advantage unless Europe and the US increase their rates too.

But if exporting is hard, importing is easy, as UK companies have found when outsourcing production. The price of imports is rising however as commodity prices increase. But international trade is better than protectionism, so the answer is not to reduce imports but to expand exports. And some things have to be bought from abroad, so with higher oil prices, Britain’s import bill remains high.
But this constant deficit in traded goods has to be paid for. Invisible exports of services are in surplus – but not sufficiently to offset the deficit on goods. Sterling’s steady depreciation is part of the price, but so is increased debt as we borrow from more affluent foreigners – and so is selling our assets to them.

When foreign investors buy shares in UK firms, buy property, buy businesses – even buy football clubs – that is a capital inflow that finances our current account deficit. Selling the family silver really shouldn’t be an alternative to exporting.