The FT (and others) have been at it again. I have written before about the Financial Times’ anti-Brexit bias and how its journalists misuse data in presenting Brexit as an “entirely negative and irredeemable event” which must be reversed.

Well they have been at it again in two recent articles. The first entitled “Brexit blamed as UK misses out on global trade rebound” and the second entitled “UK’s goods exports lowest in G7 following Brexit, study finds”.

The chart below is taken from the former article and purports to demonstrate a fall in the volume (not value) of UK goods exports in the three months to January 2023 versus the same (unusual) three month period in 2020 (and then on a rolling average basis since 2017).

The chart below is taken from the latter article and again purports to look at the volume of UK goods exports this time in comparison to the rest of the G7. Seemingly demonstrating a relative weakness since the end of the Brexit transition period in January 2021.

Both articles stand out like sore thumbs — not least because last week the Office for National Statistics (ONS) published the latest UK trade figures which showed UK exports reaching £815.2b in 2022 — up 25%. 

That represents the highest export number ever recorded in UK history; some 17 per cent higher than the pre-Covid peak in 2019 and some 43 per cent above 2016 levels — representing a compound average growth rate (CAGR) of over 7 per cent since the vote to leave the European Union. And, as the chart below demonstrates, considerably above the trend since 2010.

Indeed the export performance was so strong that we witnessed the UK achieve the highest proportion of exports to GDP since the 1970s. 

And UK exports clearly outperformed closest European peers — Germany, France and Italy.

Yet these trade figures may well have passed you by as, whilst one might have expected such a strong performance to be shouted from the rooftops, it did not seem to catch the attention of the mainstream media.

Indeed the BBC, who were quick to report a drop in UK exports to the EU in January 2021 which they blamed on Brexit (and not the obvious culprit — Covid), did not cover the trade numbers at all.

But how do we explain the obvious disconnect between the ONS report on UK trade and the FT’s view that the UK is lagging both the G7 and indeed the rest of the world?

In short, the FT is once again misusing data and driving an anti-Brexit narrative. This is how. 

Volume versus Value

Well first is the FT’s insistence on reporting exports only in volume and not value terms. Reportedly because they wish to “eliminate the effects of inflation” on comparisons. 

Let’s ignore the fact for a minute that there is no need to eliminate the effects of inflation when producer price inflation has been broadly comparable between countries (see charts below — source the World Bank).

Whilst it is true that trade can be (and is) measured in volume as well as value terms, volume is only really helpful for low value/high volume commodities and not high value/low volume products (areas in which the UK tends to excel).

Measuring in volume also ignores the fact that changes in price itself can have a significant effect on volumes sold. To give you an example, natural gas consumption. As the IEA chart below on changes in natural gas demand by EU member states in 2022 vs 2021 demonstrates, higher gas prices helped reduce volumes consumed in France and Italy by 10 per cent and 15 per cent in Germany. 

FT only looks at goods exports not total exports

Second, not only has the FT chosen to look only at export volumes and not value, it has also only looked at the exports of goods and not total exports including services.

This is an interesting choice to make when you consider that the UK is a global outlier with nearly half of all exports being derived from services versus an average of around 20 per cent for the world (7 per cent for China) and just over a quarter for the G7 (source OECD).

In fact the UK is the second largest exporter of services in the world after the USA.

Indeed, according to the ONS UK services exports exceeded goods exports in both 2020 and 2021.

That is quite an impressive performance when you consider that for the whole of the OECD in 2020 exports of services declined by more than twice the value of goods exports and have since been slower to recover.

No FT adjustments for post-Brexit changes in calculation method(s)

Thirdly, the FT has not made any adjustments for the change in calculation methods used for good exports as a result of leaving the EU. 

Under the terms of the UK/EU post Brexit trade agreement, some goods which were previously classified as UK exports to the EU27 are no longer classified as such due to rules of origin (RoO) requirements. 

These changes considerably lower the reported volume and value of UK’s exports to the EU. In one sector alone (clothing and footwear) this reduces “reported” exports by over £4b, despite the fact nothing has changed in terms of where and how they are produced.

FT has not made any sectoral comparison analysis

Fourthly, the FT has not made any attempt to look in detail at the sectoral make up of UK goods exports versus our peers to see if there are reasons (other than Brexit) why UK goods exports (in volume terms) are underperforming. 

Thankfully, this analysis has been performed for us by economist Catherine McBride in her fantastically detailed piece on “Brexit and UK trade – what has changed”. 

To quote McBride:

The UK’s export mix was particularly hurt by Covid Lockdowns in 2020 and 2021. Five product codes accounted for 37% of UK trade in 2019 but they were responsible for 62% of the total decrease in UK exports between 2019 and 2021. This was mainly caused by Covid restrictions on air travel and factory closures which reduced the availability of key components such as vehicle computer chips. The former reduced demand for UK aircraft part exports and the later reduced the UK’s production of vehicles… this combination of factors greatly lowered UK exports in 2020 and 2021 and is also part of the reason why UK trade has been slower than some other countries to recover.

Indeed, both the OECD and World Economic Forum analysed the effect of the COVID-19 pandemic on world trade and reported that several types of goods and services in particular plummeted — particularly fuels, aircrafts, cars, mechanical machinery and steel.

Considering that since 2015 the UK’s biggest goods export industries have been motor vehicles, aircraft, spacecraft, ships and military vehicles; machinery; oil and gas; pharmaceuticals and electronic machinery, it is not a surprise to see UK goods exports disproportionately affected.

In volume terms, goods exports to the EU are in line with trend

The chart below shows UK goods exports to the EU monthly at chained volume measures since 1997 with the long term trend line (source ONS). 

As you can see, not only are UK goods exports to the EU within a whisker of the long term (since 1997) trend line. But exports are running at the same levels as in 2016, 2010, 2008, 2005 and 2000.

Indeed as the chart below demonstrates, the issue with UK goods exports to the EU is that they haven’t really grown (in volume terms) in over 20 years (i.e. as members of the EU)

The same pattern is clear if you look at the quarterly data for chained volume measure since 1997.

If Brexit was responsible for a supposed underperformance in UK goods exports you would expect to see that reflected in UK goods exports to the EU. Instead what we see is that the relative underperformance in UK goods exports is, if anything, in exports to the rest of the world. As illustrated in the chart below.

Clearly, leaving the EU does not affect ROW goods exports. So the answer as to why there should be such an underperformance relative to history is much more likely to lie in the sectoral split of UK goods exports (see above).

In volume terms service exports globally are also in line with trend

The chart below shows monthly service exports globally by chained volume. As you can see post-Covid these are also moving in line with the long term trend. 

Indeed it is clear (again) that it is non-EU goods exports which are the laggard (relative to the historical trend).

But how does UK compare in volumes terms to the Rest of the World?

So it is clear that UK service exports are still doing very well in both volume and value terms. Clear that UK goods export volumes to the EU are broadly on trend but have been largely flat for over 20 years. That if there is any underperformance in UK trade post-Covid (or as the FT would now put it, post the end of the Brexit transition period), it is in non EU goods exports by volume.

But how does that compare to the rest of the world?

The FT would have us believe that the UK is underperforming not just the G7 but the whole world. But is that true?

In order to compare, I turned to the World Trade Organisation (WTO) database here and compared Total Merchandise export volume chained indices — annual (Previous year=100) from 2001.

The chart below compares the UK with the G7. As you can see, despite the FT’s claim to the contrary, the UK’s performance has been broadly in line with the rest of the G7. A little underperformance during Covid and a catch up in 2022.

Or how about in comparison to the UK’s main European peers – Germany, France and Italy? Again, there is no sign of a large divergence. 

  To summarise how the FT has once again misused data and driven an anti-Brexit agenda:

• The FT has chosen to look only at trade volumes not values because in value terms UK exports have reached historic highs.
• The FT has chosen to only look at goods exports not total exports despite the fact services represent nearly half of UK exports versus closer to the 25% for the G7 as a whole.
• The FT has chosen not to make any adjustments to the figures for post-Brexit changes in calculation method(s) despite the fact that these distort and make UK goods exports look worse by comparison (in volume and value terms).
• The FT has chosen not to make any sectoral comparative analysis despite the fact that the sectors the UK is strongest in are the very sectors which have been hit hardest by Covid (according to the OECD)
• A detailed analysis of the ONS trade volume data demonstrates clearly that UK goods exports to the EU (in volume terms) are in line with the long term historical trend
• That the real issue with UK good exports to the EU is that (in volume terms) they have not risen for over two decades (as members of the EU)
• The FT ignores the fact that in volume terms, UK service exports globally are also in line with trend, growing faster than the rest of the world and in value terms at record levels
• That despite FT charts suggesting otherwise, according to the World Trade Organisation (WTO) itself, in chained volume terms UK exports are performing in line both with the G7 and European peers — Germany, Italy and France.

We live in a country where the mainstream media either fails to cover good economic news at all (BBC) or frames it according anti-Brexit biases. The FT describes themselves as unbiased purveyors of the truth in a fake news world. I repeat the question I asked in my previous article: does that sound like the FT to you?