Global companies have begun to reroute cargo shipments away from the Suez Canal as analysts estimate that the blockage caused by the grounded cargo ship Ever Given may take weeks to clear.
Seven tankers transporting liquefied natural gas were diverted on Friday, the fourth day of the crisis. At least three were diverted towards the longer route around Africa via the Cape of Good Hope, according to Kipler analyst Rebecca Chia.
"A total of 16 LNG vessels’ planned transit via the Suez Canal will be affected if the congestion persists until the end of this week,” Chia said, adding that there will be considerable delays in the loading schedule at Ras Laffan from the beginning of April due to this congestion.
The 400-metre Ever Given ship has been stuck in the Suez since Tuesday morning after losing power and running aground, blocking the width of the canal. Dutch and Japanese engineering teams began to seek a way to dislodge the ship on Thursday, and Egypt has suspended all navigation within the canal.
The backlog caused by the blockage has sparked fears of piracy in the unstable regions surrounding the canal as ships are forced to remain static. Lloyd’s List tracking data shows more than 160 vessels paused at either end of the canal, including 41 bulk carriers and 24 crude tankers.
The Suez Canal, an artificial sea-level channel in Egypt that connects the Mediterranean Sea to the Red Sea, is one of the world’s busiest waterways.
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Its blockage will have an extreme negative impact on global trade. Approximately 13% of the world’s trade passes through the Suez Canal – an average of $9.6 billion per day, according to shipping data.
UK exports of goods to the European Union (EU) fell by a record margin at the start of the year as Brexit came into effect.
Exports to the EU fell by 40.7% in the first month since leaving the EU, the equivalent to a £5.6 billion loss in trade, the Office for National Statistics (ONS) revealed in figures released on Friday.
Imports from the EU also suffered, falling 28.8%, or £6.6 billion. The losses seen in both EU exports and imports represent the greatest monthly falls seen since records began in 1997.
The slump occurred as Brexit took effect on 1 January 2021, marking the UK’s official exit from the single market and the implementation of new trading rules and customs checks. It also coincided with the UK’s third national lockdown amid accelerating COVID-19 cases, further exacerbating the trade slowdown.
Exports of food and live animals – particularly seafood and fish – were the hardest-hit by the disruption, plunging 63.6% in January. However, the sector counts for only 7% of total UK exports. Overall, global UK exports and imports fell by around a fifth at the beginning of the year.
Although the fall in exports was historic, the decline did not reach the 68% plunge that road hauliers had expected to face. January’s GDP figure also represented the UK’s largest economic contraction since the beginning of the pandemic, but did not fall as much as the 4.9% anticipated by analysts.
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The lack of a greater decline in GDP is believed by some analysts to suggest that businesses and households have adapted better to lockdown restrictions than they had prior to April 2020, when GDP fell by more than 20% as the first lockdown measures were imposed.
Car production in the UK fell to its lowest level for 25 years during September, according to new figures released by the Society of Motor Manufacturers and Traders (SMMT).
A mere 114,732 cars were built by UK factories over the course of the month, around 6,000 (or 5%) less than in September 2019. The slump reflects general consumer uncertainty as new lockdown measures are imposed across the country, and as the UK approaches 31 December and the possibility of leaving the EU without first establishing a free trade deal.
Exports in September also declined 9.7% to 87,533 units, around 9,500 fewer vehicles sold overseas year-on-year. Overall, UK car production has fallen 35.9% behind levels seen in 2019. Car plants are forecasted to make fewer than 885,000 cars during 2020, marking the first time that production volumes will have fallen below one million since 2009.
“These figures are yet more grim reading for UK Automotive as coronavirus continues to wreak havoc both at home and in key overseas markets,” SMMT CEO Mike Hawes said in a statement.
“With the end of transition now just 63 days away, the fact that both sides are back around the table is a relief but we need negotiators to agree a deal urgently,” Hawes continued. “With production already strained, the additional blow of ‘no deal’ would be devastating for the sector, its workers and their families.”
One positive sign revealed by the September data was an uptick in battery-electric vehicles. Production of BEVs was up 37% from September 2019, with over three-quarters being exported.
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However, the boom in BEV production could yet be short-lived if no free trade deal with the EU is agreed upon. SMMT noted that, if the UK were to be subject to the WTO’s standard tariffs of 10%, the cost of UK-made electric cars exported to the EU would increase by an average £2,000 per vehicle.
Figures released by the Cabinet Office on Monday revealed that the Japanese economy shrank at its fastest rate in history between April and June, owing to the impact of the COVID-19 pandemic.
Japan’s GDP fell by 7.8%, or 27.8% on an annualised basis. This marks Japan’s third successive quarter of economic contraction – its worst performance since 1955 – having slipped into recession earlier this year. The fall also wiped out the gains brought by Prime Minister Shinzo Abe’s “Abenomics” stimulus policies, which were rolled out in 2012.
The previous worst contraction in Japanese history was an annualised 17.8% drop in the first quarter of 2009 as the global financial crisis took hold.
Takeshi Minami, chief economist at Norinchukin Research Institute, noted the COVID-19 pandemic and resultant lockdown measures’ impact on sales as the prime cause for the contraction. “The big decline can be explained by the decrease in consumption and exports,” he said.
“I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China,” he added.
The struggle to weather the impact of COVID-19 has compounded Japan’s economic worries, with 2019 seeing sales tax rise to 10% as well as widespread damage caused by Typhoon Hagibis in October.
Japan’s severe economic downturn mirrors that of other nations. US GDP declined at a rate of 32.1% in the last quarter, while the UK fell by 20.1%.
According to the Independent, many companies are struggling to decide on importing and exporting in light of confusion over the direction Brexit will take businesses.
But what is the current state of the nation’s trading with the wider world? In this article British brand Gola, that is renowned for its classic trainers, take an in-depth look at the UK’s imports and exports, from the items we sell the most of to what we’re buying in, as well as which countries are our top import and export locations.
Terminology rundown
With so much talk in the tabloids and newsrooms about trade and Brexit, you might be wondering what some or all of the terminology springing up means.
Before we delve further into what the UK has to offer in terms of trade, let’s break down some of the terminology:
- Import and export — an easy one to start with, imports are items and goods we buy into the country. Exports are items and goods we sell to other countries.
- Trade deficit and trade surplus — these two terms come under the umbrella of the balance of trade. It is essentially the difference between monetary value of a country’s exports and imports. If a country is importing more goods than it is exporting, then the country has a trade deficit. A trade surplus occurs if a country is exporting more than it is importing. Generally, a trade deficit is considered concerning as it is seen as the country being unable to produce enough goods to supply its people, requiring them to import more.
- “Special relationship” — The oft-cited “special relationship” with the US boils down to our trade relationship. In 2016, the UK exported £100 billion worth of goods and services to the US, running a trade surplus with the US of £34 billion.
- Single market — The European Single Market is a single market that guarantees the free movement of goods, services, capital, and labour within the EU.
- Customs Union — A customs union is where a group of states or countries agree to charge the same import duties to each other.
It is important to note that, regarding the “special relationship” with the US, the UK does export more to the US than any other country. However, when considering the EU as a whole with the same trade laws etc, rather than 27 separate countries, the EU imports more from the UK than the US by far.
What are we exporting?
According to the Observatory of Economic Complexity (OEC), in 2016 the UK’s top export item was cars, which accounted for 12% of the overall $374 billion export value that year. One of example of this is the world renowned Mercedes-Benz, which offer a variety of cars, including the Mercedes Gle.
Other popular UK products were gas turbines (3.5%), packaged medicaments (5.2%), gold (4.0%), crude petroleum (3.4%), and hard liquor (2.1%).
We also export a fair amount of food and drink, with items such as whisky and salmon popular abroad.
The BBC also points out that exports and imports are not just physical goods. In this digital age, it’s easier than ever to offer services as exports too, and the UK does just that, via financial services, IT services, tourism, and more.
Where are we exporting to?
In 2016, our top export destinations were:
- United States (14%)
- Germany (9.5%)
- The Netherlands (6.0%)
- France (6.0%)
- Switzerland (5.1%)
China, one of the countries the UK is eyeing up for a potential trade deal after Brexit, accounted for 5%. Again, it is worth considering that Europe as a whole accounted for 55% of our top export destinations.
What are we importing?
We are importing rather similar items as we’re exporting. Top imports into the UK in 2016 included gold (8.2%), packaged medicaments (3.1%), cars (7.8%) and vehicle parts (2.5%).
Where are we importing from?
For 2016, the top origins of the UK’s imported products were:
- Germany (14%)
- China (9.8%)
- United States (7.5%)
- The Netherlands (7.3%)
- France (5.8%)
The UK’s trade deficit
Despite our popular products, the nation is sitting with a trade deficit to the EU — we import more from the EU than we sell to the EU. In 2017, we exported £274 billion worth to the EU, and imported £341 billion’s worth from the EU. In fact, the only countries in the EU that bought more from us than we bought from them were Ireland, Sweden, Denmark, and Malta. Our biggest trade deficit is to Germany, who sold us £26 billion more than we sold to them.
The UK also has a trade deficit with Asia, having sold £20 billion less in goods and services than we bought in.
As previously mentioned, we have a trade surplus with the United States, as well as with Africa.
A trade deficit is generally viewed in a poor light, as it is basically another form of debt: the UK imported $88.4 billion from Germany in 2016. Germany imported $35.5 billion from the UK, making a difference of $52.9 billion owed by the UK to Germany.
With uncertainty abound about the impact of Brexit on imports and exports, it remains to be seen how UK businesses will continue to trade abroad, and if focuses will shift.
Sources:
https://atlas.media.mit.edu/en/profile/country/gbr/
https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/whodoestheuktradewith/2017-02-21
https://www.bbc.co.uk/news/business-41413558
https://www.independent.co.uk/news/business/news/brexit-uk-imports-exports-uncertainty-british-import-export-business-a8589796.html
https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp
https://fullfact.org/europe/what-trade-deficit-and-do-we-have-one-eu/
https://www.dw.com/en/is-germanys-big-export-surplus-a-problem/a-18365722
Today Rebecca O’Keeffe, Head of Investment at interactive investor, reports on the latest market updates, with expert insight into import/exports markets and investment.
“Equity markets are under significant pressure in early trading as the global trade war is expected to come into clearer focus this month. In Europe, various leaders face acute political pressures of their own, with Angela Merkel struggling over immigration concerns and Theresa May facing another perilous month of Brexit negotiations. Previously, investors have used significant market falls as a chance to buy the dips, however, with all these headwinds, it is difficult to view current market weakness as a buying opportunity.
“After spending weeks not fully pricing in the downside risks, as investors hoped that there would be a last-minute reprieve rather than a global trade war, investors are waking up to the potential reality of a trade war and what that means for the wider markets. Falling Chinese exports will subdue the commodity markets, individual tariffs will markedly affect sectors and their wider supply chain, and the prospect of a downward spiral is very real.
“After largely surviving the pressure during the first half of the year with markets broadly unchanged, investors may find that the second half of the year, including the unpredictable summer months, may prove even more volatile than usual, delivering some opportunities, but increasing the threats for investors.”
The details of the Government agenda for the next two years have been revealed; and the global delivery experts Fastlane International say there is some good news for exporters and logistics companies.
The delayed Queen’s Speech has finally been delivered, and the e-commerce delivery specialists Fastlane International say that there is some good news for exporters and logistics; though many Brexit details remain unclear.
Says Fastlane’s Head of Consumer Research, David Jinks MILT: ‘There are eight bills tackling Brexit alone; but the real details of the Government’s approach to Brexit, and how wedded they still are to a ‘hard’ Brexit - leaving the Customs Union and the Single Market entirely - remains to be seen as negotiations unfold.’
David comments below on the Bills introduced:
- The Customs Bill will contain legislation to ensure the UK has a stand-alone UK Customs regime on exit: not entirely good news for exporters and logistics companies hoping to see few significant changes to current tariff free exports and imports. However, the stated flexibility to accommodate future trade agreements with the EU and others does perhaps pave the way for a softer Brexit, including the opportunity to retain tariff free borders.
- Additionally, the Trade Bill will introduce a legal framework for Britain to agree free trade deals with countries and trading blocs around the world; and it is to be hoped this includes opportunities for deals with Nafta - the group made up of Canada, Mexico and the US – and the remaining members of the Trans-Pacific Partnership (TPP), the deal which was due to be implemented between 12 countries, including Australia and Japan, until Donald Trump pulled the US out of the agreement.
- More good news for UK logistics companies was the Automated and Electronic Vehicles Bill. Fastlane believes the future of UK courier services will be closely linked to greener, autonomous vehicles delivering in urban areas.
- The news that the Government is pushing ahead with its High Speed 2 Phase 2A Bill – the so called HS2A extension of the HS2 railway from Birmingham to Crew - will mean more freight transport will be able to use the existing West Coast Mainline as slots are freed-up when high-speed passenger services switch to the new line.
- News of a Commonwealth Summit next year will also help concentrate plans for British exporters post Brexit. From Australia to Zambia the 52 member countries present an A-Z of opportunities for business.
- Finally, as e-commerce delivery specialists Fastlane was interested to hear of a Digital Charter in the Data Protection Bill. Measures to crack down on internet crime help increase trust in online transactions.
(Source: Fastlane)
