Does the UK's Export Ranking Shine Too Brightly?
Does the UK's Export Ranking Shine Too Brightly?
As the United Kingdom prepares to go to the polls, politicians across the political spectrum have been repeating the claim that the UK is the 4th largest exporter in the world. This statistic raises a question about the way exports are calculated, particularly in one area: commodities – and, in the UK’s case, gold as a subset of commodities.
Let’s first look at the basics of exporting commodities. If a country were to mine and then sell any commodity outside of the nation, it makes perfect sense to include it in the country's export figures. However, gold is unique: its value is driven by investment not utility, and selling to a foreign investment house may not even involve the gold leaving the UK vault it is held in.
A significant increase in gold exports highlights a key anomaly in the 2022 export figures, the most recent data used to determine the UK's ranking of 4th globally. UK gold exports jumped from £5.7bn in 2021 to £28.5bn in 2022, propelling the country from 7th in global exports in 2021.
The volume of precious metals exported by the UK year by year: gold exports have risen dramatically in the past few years, peaking in 2022.
Source: Office for National Statistics (ONS), released 12 June 2024, statistical bulletin, UK trade: April 2024
The extent to which the physical gold itself left the country's vaults remains unclear. This raises questions about the true economic impact of such exports: Does this surge in gold exports translate to significant economic benefits for the UK? It is unlikely. While it may create jobs in the banking industry, the benefit from an increase in gold trade, year to year, is unlikely to affect much in the short term.
While undoubtedly the UK ranks high in gold exports, does the massive jump in 2022 represent a surge in UK gold production, or is it primarily a consequence of the UK acting as a trading hub for international gold deals? Given the lack of a gold mining industry in the UK, my guess would be the latter.
When we look at the UK export ranking excluding gold, there isn’t much of a change - the UK remains a world leader, in 6th place based on 2022 data. However, since 2018 the ranking would have been lower than the standard reported data had gold been excluded. In fact, many trade statisticians already exclude gold from their figures, which is why you may hear other claims that have the UK lower than 4th place. Perhaps a better indicator would be Gross Domestic Product (GDP): the market value of all final goods and services produced by a nation in a given year, where the UK also happened to rank 6th in 2022.
The position of the UK’s global export ranking: without gold the UK’s ranking has been lower over the past few years.
Source: Artorius
While this one data anomaly probably has no real consequence to the UK election, in a year when a large portion of the world is voting in a national election, it shows how easy it is for official data to be manipulated by any party or candidate to suit their narrative. This example highlights the importance of scrutinising statistics, particularly during elections, to ensure a clear understanding of what the data truly represents.
En Garde
This weekend sees the first round of voting in the French election, where 577 constituencies will elect a member of the National Assembly. In contrast to the UK system, this is a two-step process. Any candidate receiving 50% of the votes in a constituency (and representing at least 25% of the electoral register), is automatically elected. In constituencies where no candidate receives 50% of the votes cast, the top two candidates plus any candidates that received votes representing at least 12.5% of the electoral register will go into the second round of elections on 7th July. The second-round elections are generally a battle between just two or three candidates.
The most recent polls point to a victory for the far right, with the far left not far behind, while President Macron’s centrist coalition is lagging. However, the polls don’t paint the full story, as they are based on a single round of voting and don’t consider any tactical voting in the second and final round.
With markets not liking uncertainty, investors are likely to have to wait some time for clarity on the direction of policies, regardless of the makeup of the new government. Once you include the UK election, neatly placed between the two rounds of the French election and the US election later this year, we can expect market uncertainty to remain elevated for some time to come.
Josh Young de Ferrer
Portfolio Manager
*Any feedback provided can be anonymous
Important Information
All expressions of opinion reflect the judgment of Artorius at 28th June 2024 and are subject to change, without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete; we do not accept any liability for any errors or omissions, nor for any actions taken based on its content. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future results. Nothing in this document is intended to be, or should be construed as, regulated advice. Artorius provides this document in good faith and for information purposes only. Reliance should not be placed on the information contained within this document when taking individual investments or strategic decisions.
Artorius Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Artorius is a trading name of Artorius Wealth Management Limited.
FP20240628001