Asian effect is hitting home

ALMOST a year after the devaluation of the Thai baht triggered economic chaos in South-east Asia, the region's economic woes are starting to pinch in the UK.

There are as yet no headline-grabbing numbers, but Asia's troubles are affecting imports and exports, direct investment and the property market. The Confederation of British Industry and the Department of Trade and Industry estimate the crisis will trim up to 1 per cent from GDP growth this year.

On imports and exports, the picture is only just starting to become clear. The DTI reports that first-quarter exports to South Korea - the only market offering full data - fell 50 per cent to pounds 50m compared with the same period last year. Exports also fell significantly to Malaysia, Indonesia, Singapore, Thailand and Hong Kong, according to the DTI.

The decline in UK exports to the region can be explained by the collapse of local currencies there. Asian companies are finding they no longer have the funds to pay for goods ordered, which in local currency terms have doubled or tripled in price, leaving export credit insurance companies to pick up the tab.

The Dutch company NCM Credit Insurance last year imposed a Dfl34.8m (pounds 11m) provision for defaults on payments for exports to Asia on a total net profit of Dfl30.2m. The company last year covered world trade worth pounds 80bn.

"There are areas of concern such as Japan which may require cover on tougher terms and possibly higher rates," said NCM spokesman Gary Hicks. Another company source said there were increasing numbers of cases where buyers for exports in South-east Asia were unable to pay because of the currency devaluations, which have pushed up prices of foreign goods. "We're bearing the brunt of that because we have to shell out for contracts not being paid for," said the source.

A spokesman for the DTI said: "Imports have not yet been affected by the crisis." But signs of a dramatic rise in cheap imports from the region can be gleaned from the shipping companies that carry the goods over here. Last week the Far Eastern Freight Conference, a group of shipping companies that together account for 65 per cent of all trade between Asia and Europe, increased its freight

rates from the region by 15 per cent because there is a shortage of shipping containers in South-east Asian ports as fewer goods are carried to the regions and more are being sent here. "Imports are growing very fast. All the shipping lines have space problems coming in to Europe and are obviously suffering going out," said an employee of APL UK.

City economists agree. "Imports from Asia are picking up sharply in volume terms," said David Owen, UK economist with Kleinwort Benson. "Asian companies do seem to be exporting their way out of difficulties."

Mr Owen said the increase in imports is not yet showing up on import data calculated in terms of value because the goods coming in are so cheap..

Further evidence can found in government figures on relative trade volumes from non-European Union states to the EU (see graph on page 1). Although the country of origin of the imports is not stated, there has been a flood of imports from outside the EU in terms of volume, with no other possible explanation other than the Asian effect.

Asian government figures also show a significant rise in exports from the region, with Malaysian exports growing 43 per cent in the first four months of the year, Vietnamese exports up 13 per cent in the first five months and Thai exports up 8.3 per cent in March on February.

The bad trade news on the import and export front follows the drying up of Asian capital injected into the British economy. Direct investment from the Far East in Britain was the first economic activity to suffer and has now virtually stopped, jeopardising the creation of up to 100,000 jobs over the next decade in investment according to some of the most pessimistic estimates.

A number of big investments are being postponed, including the pounds 2bn second phase of Hyundai's semiconductor plant in Scotland and LG's semiconductor plant in Wales.

The UK property market is also feeling the impact, although the buoyant economy has so far managed to cushion the housing market from a resultant fall in prices.

"Of particular relevance has been the withdrawal of Asian purchasers from the London residential market and the upper end of provincial and country markets," said Steve Mallen, partner and head of research at the international estate agents Knight Frank

"Asian investors have withdrawn from the commercial property market as well, not yet by enough to destabilise it, although the real question is: is it going to get any worse?" Mr Mallen added.

Uppermost in his mind is a possible collapse in the Japanese stock market which could trigger falls in other markets. "There are significant pieces of London property still owned by Asian, particularly Japanese, institutions. A continuing crisis might force them into distress sale positions" said Mr Mallen.

Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
Arts and Entertainment
The eyes have it: Kate Bush
music
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
PROMOTED VIDEO
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
Arts and Entertainment
Downton Abbey fans rejoice, series five returns later this month
TV
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Business Development Manager / Media Sales Exec

£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor