Volatility and price pressures weigh on exporters

The percentage of both manufacturing and services exporters expecting to increase prices has risen in the past three months; traders are struggling with the value of the pound and pressure from raw material costs and other overheads. These are key findings of the latest British Chambers of Commerce research, in partnership with DHL. Surveying 2,600 exporters (and on export documentation data) showed that half (49%) of manufacturers and 39% of service companies plan to raise prices, up from 41% and 34% respectively. Exchange rates continue to trouble firms, as 69% of manufacturers citing it as a source of concern. Weaker sterling is also pushing the cost of raw materials up for exporters, with 84% saying that they are a source of pressure driving prices. For services, other overheads such as office rents are the leading source of price pressure (59%). Elsewhere, the BCC/DHL Trade Confidence Index, which measures trade document volumes for goods shipped outside the EU, rose by 4.06% on the quarter, and stood 1.03% higher than in the same time last year.  Despite these issues, however, many exporters remain bullish – 57% of both manufacturing and services exporters say that their turnover will improve in the next 12 months. Hannah Essex, Co-executive director of policy at BCC, said: “At a time when all of the cogs of government seem to be jammed by Brexit, issues crucial to the UK’s competitiveness and productivity have gone ignored. Business communities continue to shout about the scale of labour shortages, with four-in-five manufacturers reporting recruitment difficulties. Yet there has been little action relating to improvements in the UK’s training or skills system, nor has the government’s immigration blueprint delivered on calls for a system to provide easy access to skills at all levels. Shannon Diett, VP of Marketing at DHL Express, said: “The increased trade confidence index, rising 4% on Q3 2018, indicates that despite the many difficulties, the resilience of British business remains, although businesses face pressure. As the trade confidence index is a measure of trade outside of Europe, this indicates increased trade beyond the borders of the EU. We would encourage businesses to continue looking beyond Europe for opportunities, and ask the government to ensure trade deals are in place post Brexit to enable this successful trade to smoothly continue.” Key findings:

• 37% of manufacturers and 29% of services saw an increase in export orders in the last three months
• 18% of manufacturers and 15% of services sector firms saw a decrease in orders
• 69% of manufacturers and 49% of service firms are more concerned about exchange rates than the previous quarter
• 80% of manufacturers and 73% of services firms who attempted to recruit, struggled to find the right staff. This is up from the 76% seen in Q2 for manufacturers and 69% for services
• 84% of manufacturers cite the cost of raw materials as a leading source of price pressure, while 59% of services firms cite ‘other overheads’, away from raw materials, finance costs, and pay settlements
• 57% of both services and manufacturing exporters expect turnover to increase in the next 12 months
• The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, rose by 4.06% on the quarter and stood at the fifth highest level on record.