Export Climate Index backs R3, and export support

Heathrow Airport has released the results of its first “Export Climate Index,” which tracks the health of the UK’s export economy and suggests a third runway is important to improve the UK’s export capability, and that a coherent programme of export support activity is essential for economic success.

This quarterly index, commissioned by Heathrow and carried out by the Centre for Economics and Business Research (CEBR), is the first of its kind and, say the Airport, will become increasingly important as the Government moves to establish a new trading strategy, outside of the EU.

The report finds the UK Export Climate is in its strongest position since the index began in 2000 – a positive sign as the UK approaches the anniversary of article 50 being triggered. A positive Export Climate Index matters as trade and exports benefit businesses, individuals and families across the UK. British people not only benefit through direct earnings in their exported products, but also through knock-on effects in higher spending and employment.

The Index considers eight measures such as Heathrow flight numbers – including passenger flights, which altogether carry 95% of the airport’s cargo volumes. Over the last decade, CEBR has found Heathrow’s share in the value of non-EU export goods held steady around 30%, but the value of this cargo has grown exponentially, by over 150%. In 2017 alone, £48.9 billion worth of UK exports bound for destinations outside the EU/Switzerland flew through Heathrow. This analysis clearly shows Heathrow’s role as the main gateway for UK exports bound outside the EU, and the airport’s role to facilitate UK trade post-Brexit, particularly with countries like the United States, currently the most frequent destination for airport exports.

The Index finds rising oil prices and the appreciation of the pound in the last 3 months of 2017 has been offset by UK producers’ high expectations for the future, which ultimately led to an improvement in the export climate. There is also increasing consumer confidence among the UK trading partner nations, as government spending drives growth in the US, and China continues to enjoy steady growth.

As the UK’s largest port for non-EU exports by value, Heathrow say the growth of the Airport would have a direct effect on people across the UK. The Index shows the positive effects of Heathrow’s work in 2017 to increase efficiencies and marginally grow its route network to include new routes from FlyBe and Beijing Capital. This increase in flights has offset the decrease in sea port freight units leaving the UK in the last quarter of 2017. While positive, this result is not guaranteed for years to come as Heathrow becomes increasingly constrained. An expanded Heathrow would release capacity, allowing, say the Airport, connections to 40 new long haul destinations, a doubling of cargo capacity and ultimately more opportunities for the UK’s exporters.

Previous CEBR research has shown Heathrow’s third runway could add an additional £24,480 of GDP per UK family between 2019 and 2078, compared to another runway at Gatwick.

In discussion about the report at the All Party Parliamentary Group, Lord Deighton, chair of Heathrow Airport, re-emphasised that constraints on Heathrow threaten the UK’s economic future. “You can fly to ten chinese cities from European airports that you can’t from Heathrow, and we have no more freight capacity on our six biggest trade routes”.

A third runway would remove the capacity pressures, and help put that situation right. It would also both underpin how the UK does business, Deighton explained, as well as delivering jobs and capability across the country, for example through the logistics hub programme.

As Deighton put it, the music surrounding business – tariffs, non-tariff barriers, and so on, is irrelevant if you are unable to deliver goods or services that people want to buy at a price they will pay. You can’t export salmon (Heathrow’s biggest export item) to a country or region if there is no direct air route.

Vicky Pryce from the report’s auther, CEBR, said that the current prospect of trade wars, and the Brexit process, should make us be careful. She also made the point that exporting needs support, echoed by Anastassia Beliakova, Head of Trade Policy, British Chambers of Commerce, who noted BCC assist actively in exports – helping businesses complete necessary formalities.

Anastassia had three asks of goverment, to fix the fundamentals at home – including appropriate physical infrastructure such as expanding Heathrow; giving adequate export support;and having a coherent trade strategy. Without these three things, exporting would get harder.

As Vicky Pryce said: “Without ability to export, and without Heathrow’s ability to support export, the economy suffers”.

Commenting on the Index, Heathrow Chief Executive John Holland-Kaye said: “Now more than ever, the UK needs to secure its status as an outward-looking global trading nation. It is clear that Heathrow is essential to trade outside the EU, but as we continue to operate at capacity, we will jeopardise new routes and trade with the rest of the world. True transformative change to our flight network – and consequently the UK’s export climate – will only be achieved through the our expansion so we can connect all corners of the UK to the growing markets of the world.”

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