UK export growth has reached a nine month high as it continues to outperform the export growth of Europe’s other largest economies.
The UK’s Export Growth Index – which charts annual growth in total exports – has risen to 110.3 for the fourth quarter of this year, up from 107.9 the previous quarter, according to the latest European Export Index by accountants and business advisers BDO.
The latest reading marks a nine-month high for UK export growth, which is now well above the long-term growth rate of 100. UK exports grew 13% year-on-year in Q3 and this quarter’s report points to an improved performance.
In comparison with Europe’s other leading economies, the UK is on course to record the fastest rate of growth for its total exports. In France and Italy, export growth is set to accelerate.
The countries have recorded rises in their respective export indices from 101.2 to 101.9 and 101.0 to 101.2 for this quarter. Meanwhile a slight slowdown is expected in Germany and Spain, which have recorded falls in their respective export indices from 102.4 to 101.7 and 103.0 to 100.8.
Despite the mixed forecasts, all the economies are set to see above average export growth in the fourth quarter.
The positive performance of the economies shows that European exporters are benefiting from the pick-up in the global economy. The World Trade Organisation revised its forecast for the volume of world trade to grow by 3.6% in 2017, up from a previous estimate of 2.4%.
The pick-up has been driven by the renewed growth in Asia and North America, where import demand has been rising.
Demand for UK exports in particular has been rising above the long-term trend ever since the British public voted to leave the European Union in June last year. The country’s exporters have been able to take advantage of the more competitive prices they can offer customers as a result of the fall in the value of sterling.
Due to the rising demand, UK exporters are becoming increasingly confident in the short term. BDO’s UK Export Inflation Index – which indicates the rate of year-on-year growth in export prices – has increased to 105.1 from 104.0 for the quarter. The rise suggests that UK exporters are pushing up the price of their goods, although higher input costs are also playing a role in this increase.
In addition to attracting more custom from overseas, the fall in the value of sterling is also attracting higher levels of foreign investment. Foreign direct investment in UK businesses has continued to rise and is set to eclipse £1.5 trillion this year. Despite the uncertainty regarding the UK’s future trade agreements, foreign investors clearly think the cheaper investment price is too good to pass up.