Exports hold up despite disruption

Export levels in the West Midlands grew in the first quarter of this year despite ongoing disruption caused by the pandemic and the new requirements for trading with the EU, a Chambers of Commerce economic report has revealed.

Twenty per cent of businesses surveyed reported an increase in international sales compared to 17 per cent the previous quarter.

However, at a time when UK firms were getting to grips with the new EU  trading arrangements, the percentage of businesses expecting their international output to increase over the next three months fell from 19 percent to 17 percent.

This is particularly evident in the manufacturing sector with 33 per cent of firms surveyed expecting their export orders to fall over the next three months compared to 23 per cent the previous quarter. On the other hand, the percentage of service firms expecting to see an increase in international sales increased from 11 per cent to 13 per cent this quarter.

In terms of UK sales, there was only a slight improvement overall in the number of firms reporting an increase at 32 per cent compared to 31 per cent in the previous quarter. This is the highest figure recorded since the start of the pandemic and contrasts starkly with the 11 per cent recorded during the first national lockdown (Q2) last year. 

However, there is again a discrepancy between manufacturing and services sector firms with the number of manufacturers reporting an increase in domestic sales falling from 45 per cent in Q4 2020 to 30 per cent in Q1 2021.  The percentage of service sector firms reporting an increase in UK sales rose slightly to 32 per cent from 28 per cent the previous quarter.

Business confidence has improved significantly with 62 per cent of firms expecting to experience an increase in turnover and 54 per cent of businesses reporting that their profitability was likely to increase over the course of the next three months. This is an increase of 19 per cent and 15 per cent respectively when compared to the previous quarter.

The proportion of businesses reporting price pressures went up for the third consecutive quarter with 35 per cent expecting to increase their prices compared to 26 per cent in the previous quarter. 

The survey, which covers the West Midlands Combined Authority area, is the most comprehensive regular report of its kind in the region. The data is collected from quarterly surveys conducted by Greater Birmingham Chambers of Commerce (GBCC), Black Country Chamber of Commerce (BCCC) and Coventry & Warwickshire Chamber of Commerce (C&WCC).

Henrietta Brealey, chief executive of the GBCC, said: “The first quarter of 2021 represented one of the most difficult periods for British exporters in recent history with firms having to get to grips with the new rules and regulations following the UK’s departure from the European Union.

“Brexit has resulted in more red tape for businesses with many firms experiencing shortages and delays during the past three months which has pushed up the cost of exporting to the EU.

"Despite this upheaval, it is encouraging to see that the number of companies overall reporting an increase in exports rose from 17 per cent in Q4 2020 to 20 per cent in Q1 2021. However, the outlook for manufacturers’ in particular remains challenging with the number of firms expecting their export orders to increase over the next three months falling by 10 points compared to the previous quarter.

"Whilst some short-term disruption is to be expected, it is clear that some of the issues facing businesses cannot be attributed to just teething problems and will have a permanent impact on trade. Whilst the £20m SME Brexit support fund is a start, we would call upon the government to increase the amount of funding available under the scheme and take a more long-term approach to supporting businesses in adjusting to the new trading arrangements with the EU.

"To help businesses adapt to the new requirements for trading with the EU, the GBCC, in partnership with the West Midlands Combined Authority, is running a series of free webinars and offering fully funded places on various international trade courses over the next four months. Our documentation team are also on hand to help firms with any customs and export documentation queries. Businesses can find out more information via our Brexit hub on the GBCC website.”

Pictured: Henrietta Brealey