Automotive strength will see West Midlands outstrip Germany in export growth

EXPORTS from the West Midlands are set to grow three times faster than Germany’s, with the region’s automotive and engineering excellence leading the way into new markets in China and South East Asia, a new study has predicted.

The EY UK Goods Export Monitor tracks international goods export data by region, sector and trade routes over five years. It shows that goods exports from the West Midlands are forecast to grow by 8.1% from 2012 to 2017, compared to a 2.3% rise in German goods exports.

The area is on track to grow goods exports faster than any other UK region by selling high-end engineering far outside Europe, with annualised growth in engineering goods exports of 4.8%, worth £6.9bn in 2017, compared with £5.5bn in 2012.

The East Midlands is following this trend, with forecast growth of 6.1% by 2017. The largest UK goods exporters, London and the South East, are failing to match this rapid growth. Wales is forecast to be the UK’s worst performing goods exporter with forecasts of -3.1% between 2012 and 2017.

Sara Fowler, Midlands’ senior partner, EY, said: “Although the Midlands region remains behind London and the South East for total value of UK goods exports, it is the biggest regional winner by speed of growth.

“The Midlands has set the gold standard for UK goods exporters, demonstrating the benefits of a targeted export strategy. Over the last 15 years the region’s goods exporters have invested in competing at the niche manufacturing end of the automotive and engineering sectors and this is now paying dividends. Targeted investment has created enormous opportunities for fast growth, with China now the region’s second largest export partner, according to HMRC. This is also a sign of a rebalancing of our economic strengths outside London.”

UK automotive exports to China – one of the region’s biggest industries – are expected to grow 11.6% during the period, outpacing overall market growth (9.9%). It will make China the UK’s top automotive trading partner by 2017.

The study also shows the UK breaking into South East Asian automotive supply chains. UK exports of personal vehicles to Thailand are expected to rise from $302m in 2012, to $617m by 2017, with the UK capturing a 53% share of the entire import market. According to the data, UK exporters could emulate this success across South East Asia by increasing their existing share in rapidly growing automotive markets, particularly Malaysia and Indonesia.

The Middle East is said to be ripe for exploitation by UK engineering businesses. Already, firms are claiming an increasing share of UAE imports – rising from 7% in 2012 to 8.1% in 2017 at a value of $2.5bn. The UK’s high-tech success is expected to continue over the next five years, with growth in turbo jet exports to Qatar alone forecast to grow from $273m in 2012 to $481m in 2017.

Opportunities for firms supplying the oil and gas sector can expect growth opportunities in Latin America, as can those pharmaceuticals sector.

Despite the picture, EY has warned that Britain is still battling to take a lead in the international race for growth. Based on real term data, the analysis finds that while UK goods exports are growing – they are not growing fast enough. The study forecasts just 0.3% annualised growth in UK goods exports to 2017, far behind the 1% European average. This is in part driven by a predicted decline in UK goods exports to four out of five of the country’s largest trading partners: USA, Germany, France and Ireland.

“Our analysis suggests UK goods exporters are lagging behind the wider UK recovery. We are seeing a decline in demand from our traditional large trading partners for UK goods to 2017. The US is starting to re-shore some of its manufacturing capabilities and competition from countries like Mexico, Malaysia and Poland, particularly at the nuts and bolts end of manufacturing, is increasing,” said Ms Fowler.

“However, UK goods exports are still growing, particularly into fast growth markets like Brazil (7.6% to 2017) and China (6.9% to 2017) – they just aren’t growing quickly enough to meet import demand. Now that confidence in the UK appears to be turning a corner, goods exporters must stop treading water and manoeuvre into the fast lanes to growth, mirroring the success of our most buoyant sectors, which have benefited from having very targeted export strategies.”