1. business and industrial
2. textile industry

The importance of the export sector in the UK
q  The balance of payments (BoP) records the many financial transac6ons that are made between consumers, businesses and the government in the UK with people across the world. q  The BoP is Exports minus Imports q  The BoP figures tell us about how much is being spent by Bri6sh consumers and firms on imported goods and services q  Its also tells us how successful UK firms have been in expor6ng to other countries and markets. q  It is an important measure of the rela6ve performance of the UK in the global economy (the 4th Macroeconomic objec6ve) Why is the export sector of the economy vital for the UK? q  GDP: An increasing share of Britain’s na6onal output is exported overseas as the na6on becomes more integrated into the global economy. q  If Bri6sh companies can successfully sell goods and services overseas, the rise in exports boosts na6onal income and will help reduce unemployment. q  Manufacturing industry: Export sales are par6cularly important for manufacturing industry q  exports are over fiLy per cent of total produc6on. q  Thousands of jobs depend directly on the performance of the export sector and even more are affected in industries that supply materials to the manufacturing industry. q  Regional economic health: The rela6ve success of failure of export industries is important for certain regions of the UK. q  When export sales dip, output, employment and living standards come under threat and threaten to widen the exis6ng north-­‐
south divide. The importance of exports for the economy q  The UK has a deficit on its BoP q  The UK has a surplus on trade of services (invisible trade) q  This surplus is not big enough to make up for the deficit on the trade of goods (visible trade) q  Overall it imports more than it exports Reasons for the UK deficit? q This is partly because Bri6sh people have a ‘high propensity to import’ which means they really like impor6ng foreign goods q  When incomes are high consumer demand is strong, the volume of imported products grows quickly so during a boom or recovery the BoP may get worse q  This means that when income falls (during a recession) the BoP may improve q Long-­‐term decline in the capacity of manufacturing industry because of de-­‐industrialisa6on q  There has been a shiL of manufacturing produc6on to lower-­‐
cost emerging market countries and then export products back into the UK. q  Many UK businesses have out-­‐sourced assembly of goods to other countries whilst retaining other aspects of the supply chain such as marke6ng and research within the UK. q In the UK North Sea Oil and Gas produc6on has fallen and so there has been a sharp rise in imports of oil and gas Does it maCer if exports are falling? q  ReducDon in GDP: A decrease in exports means less income flowing into the country q  Lost jobs: There will be a loss of employment if expor6ng industries require less labour and if UK businesses lose market share and output to cheaper imports from overseas. q  Dip in business confidence and investment: expor6ng companies will lose confidence if their overseas orders are decreasing. They will be put off investment in future growth q  ReducDons in inflaDonary pressure: If exports fall, GDP will fall and so will price levels q  Overall, a decline in exports will leave the economy with spare producDve capacity – resources that they are not using such as unemployment unless extra spending on goods and services can be found in other parts of the economy. What can be done to improve the BoP? Ø  Encourage consumers to buy BriDsh – the UK government can support UK adver6sing campaigns and encourage public broadcas6ng companies like the BBC to produce programmes e.g. cookery programmes where chefs buy local and Bri6sh Ø  Increase producDvity so that manufacturing firms become more compeDDve Ø  Incen6ves like grants or tax relief to encourage development in areas where employment is low Ø  Tax relief on research and development to help improve innova6on of products and processes Ø  Reduce or remove laws that protect workers such as ‘unfair dismissal’ so that firms can hire and fire more easily Ø  All of these things are called supply side policies – they improve the produc6vity of the economy (allow the supply to increase hence supply side) Ø  Encourage research and development into alternaDve fuels and drilling techniques so that oil and gas exports can be reduced Ø  For example fracking is a new way of ge]ng gas that would increase the availability of gas in the UK and reduce imported gas Ø  Wind turbines or Solar panels may reduce electricity imports