By Conor Lambe, Economist at Danske Bank
With the UK preparing to leave the EU, it is unsurprising that international trade has come under the spotlight. The UK Government has confirmed that it will seek to negotiate a free trade agreement with the EU and is hoping to strike free trade deals with countries from around the globe. Negotiating a range of new free trade agreements won’t be easy and it will take time, but if the Government is successful these deals will create new opportunities for businesses throughout the UK, including in Northern Ireland.
Data from HMRC shows that Northern Ireland has enjoyed some success in growing its exports of goods. In the year to 2016 Q3, the value of goods exports was six per cent higher than in the year to the third quarter of 2015. Along with the West Midlands, the East, the South East and Wales, Northern Ireland was one of the five regions of the UK that experienced an increase in goods exports over this period. The data for Northern Ireland also shows that goods exports began rising in the year to 2015 Q3, so the strong growth rate in the third quarter of 2016 was the fifth consecutive quarter of growth.
These headline figures tell a positive story, but it can often be useful to delve into the detail and explore the data for different categories of goods and the regions of the world that Northern Irish businesses are exporting to. Doing so can reveal some of the areas where success has been concentrated by identifying which products and regions make up a large proportion of Northern Ireland’s total exports and have also been growing quickly.
The average rolling four quarter growth rate of Northern Ireland’s total goods exports between the final quarter of 2014 and the third quarter of 2016 was 1.7 per cent. And as there are ten categories of goods, the average share of total exports between 2013 and the year to 2016 Q3 was ten per cent.
Danske Bank analysis shows that there are two categories which exceeded both these average figures – chemicals and miscellaneous manufactures. Chemicals exports include, for example, medicinal and pharmaceutical products, plastics and chemical materials and products. Over the time period analysed, the average rolling four quarter growth rate of chemicals exports was just under 30 per cent and its average share of total exports was around 15 per cent.
Miscellaneous manufactures includes items such as furniture, scientific instruments and clothing. The average growth rate of exports of this category of goods was just over 14 per cent and, coincidentally, the average share of total exports was also just over 14 per cent.
The same analysis can also be applied to the regions that Northern Ireland has been exporting to. In this instance, as there are only eight key geographical regions included in the data, the average share of total exports was 12.5 per cent. Our analysis identifies one stand out region – North America. The average growth rate of exports to this region was over 25 per cent and its average share of total exports was around 20 per cent. It’s also worth pointing out that exports to the non-EU Western Europe region, which includes countries such as Switzerland, Turkey and Norway, have also grown quickly but currently only make up a small proportion of total exports.
Going forward, it will be important for businesses in Northern Ireland to sell more into overseas markets, particularly if the long-term benefits on offer from a new range of trade deals are to be realised. The hope is that businesses across sectors will eventually have access to new exporting opportunities that will encompass a wide range of products and destinations. But this analysis identifies a few product categories and regions where Northern Ireland could be well placed to make further gains on the global stage.
This article was published in the March/April 2017 issue of Ambition.