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Leading bank trade index reports early upturn in virus recovery for SMEs.

Written by John Crellin on Thursday, 20 August 2020. Posted in Global

For many SMEs, especially those whose businesses are export driven, the last few months have been traumatic like no other.

Leading bank trade index reports early upturn in virus recovery for SMEs.

For many SMEs, especially those whose businesses are export driven, the last few months have been traumatic like no other.

But, even with UK manufacturing marking up record lows  and coronavirus hitting supply chains and skewering demand for British goods and services, there have been early signs of international demand returning to ‘normality’, according to the latest Lloyds Bank International Trade Index.

As the virus took its toll in early 2020, the Lloyds index hit an all time low of 34.6 between April and June – surpassing the previous depths of 38.8 recorded in 2009 amid the global financial crisis. 

UK manufacturing exports fell sharply in Q2, says the Lloyds Index. The speed of decline was the fastest since data collection began in 1996, driven by the impact of coronavirus on both international supply chains and falling overseas demand for British goods and services.

Downturn

Of those manufacturers who reported a downturn in overseas orders, the vast majority (93%) attributed falls to the impact of coronavirus, blaming the pandemic for shrinking demand, widespread business closures, and delays to export projects.

Basic metals (28.3) and automotive (31.5) exports were hit hardest, reflecting a fall in global demand for manufacturing components and the shutdown of car production in Europe.

Exports of chemicals and plastics (41.1), including pharmaceuticals and healthcare products, fell at a slower rate than other manufacturing goods. This was in part due to forward purchasing by overseas buyers in expectation of delivery delays. 

Historic low

Meanwhile, UK services firms saw the sharpest drop in new overseas work since the inception of the Services New Export Business Index in 2014, measuring 29.2 in Q2, down from 42.7 in Q1. The fall was mainly due to international travel restrictions, with business-to-business (28.5), transport and communication (29.8) and technology (29.8) services all severely affected.

Signs of recovery

But, even as the virus spread, the end of the second quarter of 2020 saw early signs of international demand returning with June figures showing an increase in appetite for British consumer goods.

In June, UK clothing and textiles (50.7) and other manufacturing (56.7) goods (which includes sports and leisure equipment), furniture, and luxury items such as jewellery manufacturing exports grew.

China ease

A sharp economic contraction in the majority of UK export markets, including the European Union and North America was also recorded in the Lloyds Index, driving a trade-weighted measure of global demand for British goods and services to a record low of 35.2 in the Q2 2020. 

After posting a reading of 42 in Q1 2020, China was the only UK export market to record an increase in Q2 (52.6), as the country’s lockdown measures eased. 

Gwynne Master, managing director and global head of trade for Lloyds Bank Global Transaction Banking, says: “The Q2 results demonstrate the full impact of the pandemic which saw swathes of the global trade markets shut down amid efforts to help contain the spread of the virus 

“Export measures hit an all-time low in Q2 although there were small signs of recovery as early as May and into June. While it is too early to talk about the trajectory of recovery, it is encouraging to see enhanced external demand, signs that China’s economy is stabilising, and some UK consumer goods’ export growth in June. 

“Government schemes and finance options continue to be made readily available, which will help UK exporters continue to trade, to position for a return to normality to international trade, and to prepare now for potential future disruption.”

The Lloyds Bank UK International Trade Index  is a quarterly measure of demand for UK exports and international supply chain conditions, giving real-time insights into how British businesses are faring in international markets.

In a further optimistic outlook from Lloyds for SMEs, Paul Gordon, managing director for SMEs and Mid Corporate Lloyds Bank Commercial Banking says: “With only one region reporting a fall in sentiment we are starting to see sentiment lift for the vast majority of regions across the UK. The easing of Lockdown restrictions, including the reopening of the economy and the relaxation of social distancing rules has resulted in most businesses reporting improvements in demand from a record low base. This is key for the summer season which will allow businesses to continue to open their doors and trade in the weeks and months ahead.”

About the Author

John Crellin

John Crellin

John Crellin is an experienced press business journalist writing business news for blue-chip clients across a range of industry sectors. A particular passion is highlighting SME achievements which slots John in well with the Elite team. If pressed, he will confess a more than passing interest in the fortunes of Wolverhampton Wanderers FC.

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