UK Tech Exports to Drive 15 Years of Bumper Trade Growth

Technology exports will drive Britain's trade over the next 15 years as the UK cultivates a more educated workforce and Asia starts to diversify away from being cheap production hub.

According to a HSBC's Global Connections report, high-tech products will account for more than a quarter of all goods traded by 2030, compared to 22% last year, as "technology becomes essential for maintaining and enhancing standards of living, promoting business investment and supporting economic development" [Figure 1].

However, HSBC has warned that Britain needs to raise levels of research and development (R&D) investment and improve engagement between educators and businesses if it is to maintain its competitiveness in these sectors.

"The example of high-tech presents lessons for other sectors and the future pattern of global trade," said Mark Emmerson, HSBC UK Head of Global Trade and Receivables Finance.

"Companies within developed economies that own the intellectual property of high value goods still enjoy a strong competitive advantage, but under-investment in R&D could threaten the advantage the UK enjoys, presenting an opportunity for emerging markets to gain ground.

"The world economy is becoming more knowledge-intensive – it is essential for the UK to invest in research and improve links between education and business to retain competitiveness and enhance future growth."

The latest figures show the UK invests 1.77% of GDP in R&D, a figure that has remained broadly constant over the past 20 years, compared to 2.77% in the US, 2.84% in Germany and 2.25% in France.

It is developing economies that have accelerated investment over the same period.

In developing Asia, R&D spend as a percentage of GDP has more than quadrupled to 1.8% and has almost caught up with that of Europe, while China now spends the equivalent of 1.8% of its annual GDP on R&D, a near doubling of its expenditure over the past 20 years.

Overall, HSBC's Trade Confidence Index (TCI) increased by five points from six months ago to reach 113, in the second half of 2013, the highest reading in the survey's four and a half year history.

Any reading above 100 signals anticipated expansion in trade amongst businesses.

The HSBC Trade Forecast shows that trade conditions are improving for UK businesses, with 63% of exporters expecting trade volumes to rise over the next six months, up from 61% during the second half of 2013.

UK exports are forecast to increase by 5% per annum over the next two years, driven by the economic recovery in Europe and North America, as well as opportunities in faster-growing markets.