Drinks brands defy the odds as manufacturing exports fall

UK manufacturing exports fell for the fourth quarter in a row between January and March, at 46.8 for new exports, down from 47.9 in the last quarter of 2019, according to the Lloyds Bank International Trade Index.

The sharpest drop occurred in March, which saw the fastest monthly downturn since 2012.

Food and drink was the only manufacturing sub-sector to buck this trend, with exports growing for the first time since the second quarter of 2019 between January and March to 50.5.

The sector’s performance was underpinned by strong demand in key export markets, such as the USA and Ireland, and the easing of global trade tensions from 2019, when higher US trade tariffs on European products, such as whisky, wine and cheese and uncertainty over the UK’s departure from the EU caused UK food and drink exports to fall. 

In March, UK manufacturers experienced delivery delays and reduced availability of key inputs on an unprecedented scale since 1998, with a supply chain pressure reading of 33.

Meanwhile, in 2020 UK services businesses saw the sharpest quarterly drop in new overseas work since the Index began in. The fall was driven by a slump in international travel.

Performance and good growth levels in the UK food and drink sector as well as the financial services industry in Q1 are sources of encouragement

Financial services, however, outperformed the sector at large during the first quarter of this year with a reading of 51.5, with new business from overseas increasing at the fastest rate since the third quarter of 2019. Firms surveyed attributed this growth to greater clarity over Brexit, although some said international clients were still delaying spending decisions due to coronavirus. 

The Index, compiled in partnership with IHS Markit,  also noted the end of a seven-year run of global economic expansion during the first quarter of 2020 at 45.8 over the past three months, down from 50.3 at the end of last year.

Gwynne Master, managing director and global head of trade for Lloyds Bank Global Transaction Banking (pictured) said: “The China shutdown sent shudders through the global economy and complex global supply chains, with an unprecedented knock-on impact for UK exporters. Performance and good growth levels in the UK food and drink sector as well as the financial services industry in Q1 are sources of encouragement.

“It is reassuring that China, one of the first major economies to gradually return to work, is showing signs of an economic recovery.”

At a glance:

  • UK exports fell in Q1 2020 as impact of coronavirus hit global supply chains. 
  • Growth in food and drink exports softened the slowdown for UK manufacturing
  • The sharpest drop in manufacturing exports occurred in March, when international efforts to halt the spread of coronavirus across the globe accelerated. 
  • UK services exports fell at fastest rate since 2014, although financial services a bright spot.
  • Seven-year run of global economic expansion ends in Q1 2020.