Rising International Trade Confidence Offsets UK Economic Woes

UK importers’ and exporters’ confidence in international trading conditions lifted the overall Travelex Confidence Index (TCI) in May, despite increasing concerns over the slow pace of economic recovery. The index measures sentiment among UK businesses that trade internationally across three areas – the UK economy, international trading conditions and expectations for future trade.

Importers’ confidence in the UK economy hit an all-time low last month, dropping 26% over the month to 34%, while exporters’ were equally pessimistic, with confidence tumbling 15% to 47%. Sixty percent of businesses that trade internationally also expressed concern over rising inflation, which is impacting their competitiveness abroad. One importer/exporter said: “Inflation is hitting our bottom line directly; all our overheads are increasing and we are not in a position to put up our prices to compensate.”

Despite their concerns over current economic conditions, 68% of importers and exporters are confident that international trade conditions will improve over the next 12 months (6% higher than last month), while almost three-quarters (74%) are confident that they will see growth in global trade over the next 6-12 months (a 6% rise since April).

Over half of the businesses interviewed expressed concern over tighter credit conditions, as they struggle to obtain the financial support needed to maintain stability and boost growth. May saw a 128% increase in exporters struggling to find capital.

David Sear, global managing director at Travelex Global Business Payments, said: “Small businesses that trade internationally expressed greater optimism in May, causing the index to climb to the highest it has been since November 2010. For exporters, the news that exports hit a record high in the first quarter of this year will have provided a welcome confidence boost, as it suggests that trade made a strong contribution to first quarter GDP [gross domestic product] growth.

“Despite this, the uplift in confidence has been tempered by a fall in sentiment in the current economic situation, which hit an all-time low. Three in five businesses cited inflation as a massive issue and credit continues to be a problem for small businesses trading internationally.

“Exporters are confident that they can drive the recovery, but in reality, it will be difficult for them to do so when economic and credit conditions are so poor,” he added.


Related reading

New consumer banking head for Citi Asia Pacific