Global protectionism and Brexit could dent UK trade prospects



  • Trade barriers continue to grow with nearly 400 new measures set to be put in place this year

  • UK exports to grow by £20bn in 2018 compared to £50bn in 2017

  • European and Asian markets offer most potential for UK export growth

  • Global trade volumes forecast to soften from 4.3 per cent this year to 3.9 per cent in 2018 

London – 27 NOVEMBER 2017 – The impact protectionism on global trade and uncertainty about Brexit could reduce the volume growth in UK exports in 2018, according to Euler Hermes, the world’s leading trade credit insurance company.

UK exports are set to grow by £20bn in 2018 driven by competitiveness gains from a weaker pound and higher demand from Europe, but still a slowdown in growth following the £50bn increase in exports forecast for this year. The chemicals (£2.1bn), machinery & equipment (£2.0bn) and jewelry, artworks & precious metals (£1.8bn) sectors are set to benefit most next year.

Ludovic Subran, Chief Economist at Euler Hermes, said:

The export sector is currently the bright spot of the UK economy as British exporters benefit from the cyclical upswing in Europe and a cheaper pound. Isn’t it ironic? The export success story could be short-lived if Brexit talks lack pragmatism and end up in a cliff-edge scenario with no transition deal by 2019. New trade opportunities confirm that a soft Brexit as a win-win situation.

The forecasts are made in the latest Euler Hermes Global Trade Outlook, ‘Game of Trade: Unbowed, Unbent, Unbroken?’. The number of global protectionist measures is at a record high and continues to grow with more than 400 new barriers set to be in place by the end of the year. This includes 87 in the US up to the end of October, or nearly a quarter (23 per cent) of all new measures, according to the report. This follows 84 and 86 trade barriers introduced by the country in 2016 and 2015 respectively.

In addition, the continued ‘balkanisation’ of financial flows has stemmed access to finance for businesses around the world. The report reveals that cross-border bank lending contracted by -0.2 per cent year-on-year in Q2 2017 and the emergence of a global trade financing gap of US$1.5trn.

The report reveals that Euler Hermes expects growth in global trade volume to slow to 3.9 per cent in 2018 as a result, after a 4.3 per cent increase this year. But this rate is still only half of the average of eight per cent growth recorded between 2003 and 2007, before the financial crisis. In value terms, global trade is forecast to grow by 7.5 per cent in 2017, but slow to 6.3 per cent next year.

Despite the global softening, the findings show that European and Asian markets offer significant potential for UK export growth. There will be more than US$1trn of additional import demand next year from the Chinese (US$407bn), German (US$254bn), French (US$135bn), Dutch (US$119bn) and Indian (US$111bn) economies, according to the findings.


Ludovic Subran added:

Financial protectionism is the greatest danger for global trade. There needs to be disciplined support from governments for longer-term investments and the digital revolution, as well as plenty of cash available on company balance sheets to see them through the current trading conditions. Global trade lost close to USD3tn between 2014 and 2016. We expect the trend to reverse in 2017 and in 2018, the world should recover the lost USD3tn, but only if protectionism is tackled strongly enough.



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