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Last year in the UK, 48% of all exports were manufactured goods, this contributed about £270bn to our economy and helped reinforce our position as the worlds eighth largest manufacturing country by output.
Exports play a major role in the UK economy and can affect everything from economic growth to employment rates to currency values. After WWII, transport costs dropped, globalisation occurred and tariff barriers were reduced, all these things helped towards making exports become a larger share of the UK income.
In recent years, our biggest export partner, the EU, has seen the value of exported goods fall from £165bn in 2011 to £134bn in 2015. During the same period, our non-EU exports have grown from £143bn to £149bn making non-EU exports the main buyer of British output.
With Brexit just around the corner, these figures may change significantly however, until a final deal is approved, we can only speculate on the outcome. Many countries including New Zealand, Australia, India and China have hinted at an eagerness to tie up trade deals upon Britain leaving the EU which is a positive. This may be small fry though compared to the potential losses from EU trade should Brexit affect our current trade arrangements with the EU.
The largest manufactured product groups we export are Mechanical & Electrical machinery, Cars and Aircraft which accounted for about £125bn of EU and non-EU exports. Our biggest partner for exports is the good old US of A, which accounted for £48bn worth of exports. They were closely followed by Germany & France at £37bn and £25bn respectively. In terms of imports, Germany has fared the best with the UK importing just under £70bn worth of their goods.
Overall, exports of goods and services make up just under 28% of our GDP which shows just how important it is to our economy. In order to help increase this number there are several options the UK could look at. One option, which has already occurred to an extent (thanks to the Brexit vote) is the devaluation of the pound. This is what was behind the surge in exports immediately after the vote as it makes exports cheaper. Another would be to reduce tariff barriers however this can cause a major shift within the economy as some domestic industries would not be able to compete. Even though there would be a shift within the economy, the theory of comparative advantage states overall economic welfare would increase. We could also look at reducing non-tariff barriers to help improve frictionless trade and increase exports.
Of course, we will have to wait and see what kind of deal our government puts together during negotiations before we can decide on how best to improve our position in the world and what steps we are going to take to achieve it but the fact that we have a strong manufacturing output, excellent worldwide connections, and a reputation for high quality goods stands us in good stead for the future, whatever the outcome.
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