Not long ago there was an official Government target for UK exports.
“We want to double our nation’s exports to £1 trillion this decade,” the former Chancellor, George Osborne, proclaimed in his 2012 Budget speech. Many said at the time that it was a foolishly unrealistic target. But ministers insisted it really could be done. Comparing it to Maoist pledges of a great leap in steel production was unduly cynical, we were told. So, five years on, are we nearly there yet? Not exactly.
Alongside Philip Hammond’s Autumn Budget last week, the Office for Budget Responsibility released its latest UK exports forecasts. The total value of overseas sales in 2017 is projected to be only £549bn, up just 16 per cent on the £473bn in 2012. And the forecast for 2020, the date when we were supposed to hit the magic £1 trillion number? £575bn. So a miss by a mere £425bn. Not exactly the kind of sum one finds down the back of the sofa.
It’s a safe bet that Osborne would blame the 2016 vote for Brexit, which he strenuously argued against, and the decision by Theresa May to yank us out of the EU single market and customs union in 2019 for this failure (although the reality is that we were well adrift long before the referendum vote).
But what about Liam Fox, the International Trade Secretary? This leading Brexiteer can hardly blame leaving the EU for Britain’s export underperformance relative to those 2012 targets, set by a government of which he was a senior member.
In February, Fox told a parliamentary committee that disappointing global growth was the reason we would not get there. Yet global growth is now picking up rather strongly, just as Britain slows down sharply due to the negative impact of higher inflation and an apparent investment freeze by many nervous UK firms.
True, British export values are up 15 per cent since the referendum vote. But this is actually pretty disappointing given the tailwind of a record plunge in the value of sterling, which instantly makes our goods and services more competitive overseas.
Brexit itself can’t possibly be the problem for its champions, so other culprits have been identified by Liam Fox. “I can agree as many trade agreements as I like, but if British business doesn’t want to export, then that doesn’t do us any good,” he said in an interview last week.
This was essentially a more sanitised version of his comments last September, when he was caught on tape accusing British exporters of letting the country down by being too “fat and lazy”.
“We’ve got to change the culture in our country,” he ranted. “People have got to stop thinking about exporting as an opportunity and start thinking about it as a duty – companies who could be contributing to our national prosperity but choose not to because it might be too difficult or too time-consuming or because they can’t play golf on a Friday afternoon.”
Leaving aside the aching hypocrisy, the flawed economic worldview such comments betray is notable. Fox seems to see strong export-growth as something that relies, fundamentally, on vigour and patriotism from firms. In fact, the evidence suggests it requires a dense framework of state support from above and below.
Dig around for the roots of the exporting prowess of Germany’s famed small and medium-capacity “Mittelstand” companies and one finds an active state-owned local banking system. It’s a system in which bankers actually encourage their corporate customers to venture into overseas markets, happily extending credit for the purpose.
It’s a far cry from here, where small firms’ trust in their banks is chronically low. Nothing that the Government is fiddling around with – on new export-credit guarantees and the like for firms – comes close to trying to emulate this German ecosystem of truly community-embedded, corporate-relationship banking.
These are the benefits of EU membership that the Brexiteers, with their 19th-century mental image of trade as merely the shipping of finished manufactures and raw commodities, refuse to acknowledge. In the 21st century, regulation is not the enemy of free trade; rather it helps create the market. As Sir Ivan Rogers, our former top Brussels diplomat, put it: “Contrary to the beliefs of some, free trade does not just happen when it is not thwarted by authorities.”
Sir Ivan’s candour was not welcomed by ministers and he resigned in January. Perhaps what they wanted to hear was that, thanks to Brexit, hitting the elusive £1 trillion export target will be a piece of cake.
This article was originally published in The Independent on 26/11/17