View from City Road: Why Britain has to concentrate harder

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The Independent Online
Britain's trade position improved significantly during the third quarter of the year, but remains in the red despite depressed home spending and imports. So how good has Britain's trading performance really been?

David Kern, economist at NatWest, argues that Britain's exports are not concentrated enough in the countries and products where demand is growing most strongly. For example, Britain is doing relatively badly in exports to newly industrialised countries in Asia. Our specialisation in chemicals has also over-exposed us to a sector in which world imports are growing half as quickly as, say, high-technology engineering.

A similar point emerges from the data in yesterday's Economic Outlook from the Organisation for Economic Co-operation and Development. The OECD computes the weighted growth rate of each leading country's existing export markets, and finds that UK export markets grew 4 per cent in 1992 and 0.5 per cent in 1993.

By contrast, the developed world as a whole grew by 4.7 and 1.6 per cent. The Asian industrialisers put in growth of 7.5 and 6.7 per cent.

The Economic Outlook projects, though, that the best of Britain's export performance is still to come. Although our markets will continue to grow less quickly than those of the OECD nations as a whole over the next two years, the inter-governmental club thinks our exporters will do relatively well in serving them. In 1994, the OECD projects a rise in UK export volume of 6.9 per cent against market growth of 4.6 per cent, a testament to devaluation and cost competitiveness.

But exporters should not be content to bank the benefits of a lower pound in wider margins earned in existing markets. They need to intensify their search for promising new markets, with innovative products to sell in them.