The UK’s exports of services exceeded exports of goods for the first time in 2020. Although at first the gap between services exports and goods exports was narrow, it has since widened, with services exports worth almost £100 billion more than goods exports in 2023.
This Insight looks at the UK’s recent export performance.
International trade is a large part of the economy
International trade is important for the economy. The UK exported nearly £850 billion of goods and services in 2023, equivalent to 32% of GDP. Imports amounted to £898 billion (33% of GDP). These figures, and those in the rest of this Insight, exclude trade in precious metals. This trade, the majority of which is in gold, can be large and volatile, distorting underlying trends. Unlike most exports, exports of gold do not add to GDP.
Trade can help improve economic performance. Exporting businesses are important in driving productivity growth. Openness to imports means more competition in the economy, which should improve products and reduce prices. But trade has become less predictable in recent years. International trade has been affected by a number of events such as the covid-19 pandemic, Brexit and the conflict in Ukraine. Countries have also increasingly moved towards protectionism – supporting domestic industries by restricting trade – driven by a wish to promote green technologies and strategically important industries.
Recent UK export performance
Total UK exports fell by 11% in real terms in 2020 as a result of the covid-19 pandemic, before recovering in 2021 and 2022. Real terms export growth slowed in 2023, relative to the previous two years and, as a result, exports in 2023 were only 0.5% higher in 2023 than 2019 in real terms.
There has been a marked difference in export performance between sectors, with the value of services exports increasing more rapidly than that of goods exports.
Services exports have overtaken goods exports
The value of UK exports of services overtook goods exports for the first time in 2020, and has remained ahead ever since.
By 2023, services exports amounted to £470 billion, 25% higher than goods exports of £377 billion. This was in part due to a fall in goods exports in 2023, largely because of a big decrease in exports of fuels. These trends are illustrated in the chart below.
The largest category of UK service export is “other business services” which includes legal, accountancy, advertising and architectural services. The UK exported £185 billion of “other business services” in 2023. Other significant categories of UK service exports include financial services, where the UK exported £77 billion in 2023, and travel (£59 billion).
While exports of services fell by nearly 11% in real terms in 2020, they have recovered strongly and in 2023 were 13% above their pre-pandemic and pre-Brexit peak in 2019. Exports to the EU were 9% higher in 2023 compared with 2019 while those to non-EU countries were up 15%. The Library briefing on UK-EU trade statistics has more detail.
As the chart below shows, non-EU countries account for almost two thirds of UK services exports. This contrasts with goods where exports are more evenly split between EU and non-EU countries.
The UK has generally had a surplus on trade in services, meaning UK exports of services exceed imports of services. In 2023, this surplus was £153 billion (5.7% of GDP).
Goods exports have fallen in real terms
Goods exports fell by 12% in 2020 in real terms as the economy was severely disrupted by the pandemic. Modest growth in 2021 and 2022 was followed by another fall in 2023. Goods exports were 12% lower in real terms in 2023 compared with their 2018 peak.
Over this period, exports to the EU fell by 13% while exports to non-EU countries fell by 12% in real terms. The UK has had a large deficit on trade in goods in recent years, reaching £204 billion (7.6% of GDP) in 2023.
Government trade strategy
The new government has said it will publish a trade strategy as part of its plans to increase economic growth. It said the trade strategy will link with its industrial strategy and aims to promote the government’s economic security and net zero objectives.
About the author: Dominic Webb is a researcher at the House of Commons Library, specialising in international trade.
Image credit: Steve Gibson on Flickr, CC BY 2.0