The International Report

This report considers the current state of manufacturing exports and the issues faced by engineering companies.

The UK is the 10th largest goods exporter in the world and there is no question that exports and further internationalisation are fundamental to the future success of UK manufacturing. Recent years have been tricky times for world trade and particularly UK exports. World Bank statistics show a damaging drop in exports in 2009 was followed by a bounce-back in 2010 and 1011; but since then the growth has virtually stalled.

Unfavourable sterling exchange rates and the economic weakness in the rest of the EU, which takes around half of all UK exports, are the explanation, though this year has seen a sharp decline in export sales to the US, our single biggest market.

In this report, BDO summarises the findings of its recent survey on exports and internationalisation and shares some thoughts on next steps for UK manufacturers. Produced in collaboration with the Institution, the survey of manufacturers and engineers was conducted in April 2015.

Key findings

• UK-based engineering companies which export are heavily dependent on overseas trade for their continued survival, with more than a third generating over 80% of their turnover from foreign markets
• The largest overseas markets for UK manufacturers were Western Europe (75%), followed by North America (54%). The growing success of businesses breaking into China was also illustrated with just under a quarter selling goods there, the third largest single market for UK firms
• The UK is the 10th largest goods exporter in the world and the vast majority of engineers surveyed (78%) believe that it is the quality of UK products that holds the most value for overseas customers, in stark contrast to price (only 20%)
• With product quality being the key to export success, constant innovation and re-invention is the prevalent strategy needed to maintain a seat at the global export table. In order to achieve this, research and development (R&D) is crucial. Worryingly, however, just under a third (28%) of those surveyed felt that their company wasn’t spending enough on R&D to keep its competitive position. This is of particular concern given the increasing sophistication of low-cost economies such as India and China.