Last reviewed 30 June 2020
UK exports could be down by as much as £50 billion as a result of the global economic slowdown caused by Covid-19, according to new research by PricewaterhouseCoopers (PwC).
They could decline by as much as 8% in 2020 compared to the previous year, with future prospects dependent on both the pace of global economic recovery and the type of trade agreement the UK strikes with the EU following the end of the Brexit transition period in December. Along with a fall in exports, the pandemic is likely to have a long-lasting impact on global trade and supply chains, PwC argues.
Although the crisis has shown how trade has been essential to saving lives and livelihoods — from the supply of personal protective equipment (PPE) and other medical equipment to food — it believes that the international trading system is likely to come under pressure from the forces of deglobalisation.
Senior economist at PwC, Jing Teow, said: “Businesses will want to ensure that they are not dependent on one single country or region as a source of production inputs, as many global businesses found to their cost when Hubei in China was first struck down by the pandemic in December 2019.”
The decline in trade activity as a result of the lockdown has primarily been driven by the fall in services trade. UK export of services declined by £12.4 billion, while import of services declined by £10 billion in the three months to April 2020. Services exports and services imports fell by 28% and 43% respectively between March and April, which is significantly faster than goods exports and imports (9% and 20% respectively).
PwC highlights that, although China’s industrial production fell by 19% between December 2019 and February 2020, levels over the past few months have almost recovered to pre-Covid-19 production levels.
It suggests that a similar recovery is possible for countries such as Germany, the UK and Japan over the coming months, assuming that the peak impact has passed.