Bright Export Figures Defy Expectations and Strength of Sterling

Businesses based around the UK delivered their strongest set of exporting revenue figures in almost a decade during the second quarter of this year.

According to data from the Ernst & Young (EY) ITEM Club, there was a striking 6.6 per cent increase in the value of exports heading out of the UK to elsewhere in the world during the three months prior to the end of June this year.

The figures have defied expectations among economic analysts, particularly in light of the relative strength of the British pound against the euro.

In fact, business experts from EY, while welcoming what represents broadly positive data for British companies, have suggested that the upward trend for exports out of the UK looks unlikely to continue given the importance of European markets to exporters around the country.  

The 6.6 per cent rise in exports during Q2 2015 is the sharpest increase recorded in a three-month period since early 2006 and before the Financial Crisis.

“Overall, even if the Q2 strength is not subsequently revised down, it is difficult to envisage the firmer data persisting, given the ferocity of the headwinds coming from the strong pound,” said Martin Beck, senior economic adviser to the EY ITEM Club, which assesses and forecasts economic conditions and sentiment around the UK.

The growing strength of the pound against the euro has seemingly already had a notable dampening effect on exports to Eurozone economies, with the latest numbers showing 1.8 per cent growth in exports to Europe from the UK as compared with a 6.4 per cent increase in exports to the rest of the world.

“The geographic breakdown of exports offers some confirmation that exports to the Eurozone are being constrained by the sizeable appreciation in the value of the pound against the euro,” Beck observed.

EY’s economic expert also pointed out that the recent upward trend in exports from the UK goes against expectations among businesses from around the country, which have reportedly “painted a universally gloomy picture on exports”.

The deficit between Britain’s imports and exports in the second quarter of the year was smaller than it has been in four years, with the rise in export values the sole reason why, according to EY’s figures on the subject.