Heathrow Airport has today released the results of its first Export Climate Index, which tracks the health of the UK’s export economy and its impacts on families and businesses across the country.
Heathrow cargo figures form part of new index tracking predicting health of UK’s Export Climate
CEBR analysis confirms Heathrow’s increasing importance ahead of other ports and its capability to trade outside of EU
Report shows the relevance a healthy export climate has for jobs and production across the UK
This quarterly index, commissioned by Heathrow and carried out by the Centre for Economics and Business Research (CEBR), is the first of its kind and will become increasingly important as the Government moves to establish a new trading strategy, outside of the EU.
The report finds the UK Export Climate is in its strongest position since the index began in 2000 – a positive sign as the UK approaches the anniversary of article 50 being triggered.A positive Export Climate Index matters as trade and exports benefit businesses, individuals and families across the UK.
British people not only benefit through direct earnings in their exported products, but also through knock-on effects in higher spending and employment.The Index considers eight measures such as Heathrow flight numbers – including passenger flights, which altogether carry 95% of the airport’s cargo volumes.
Value of non-EU exports via Heathrow grows by 150% in 10 years
Over the last decade, CEBR has found Heathrow’s share of the UK’s non-EU export goods, by value, held steady at around 30%, but the value of this cargo has grown exponentially, by over 150%.
In 2017 alone, £48.9 billion worth of UK exports bound for destinations outside the EU/Switzerland flew through Heathrow. This analysis clearly shows Heathrow’s role as the main gateway for UK exports bound outside the EU, and the airport’s role to facilitate UK trade post-Brexit, particularly with countries like the United States, currently the most frequent destination for airport exports.
The Index finds rising oil prices and the appreciation of the pound in the last 3 months of 2017 has been offset by UK producers’ high expectations for the future, which ultimately led to an improvement in the export climate.
There is also increasing consumer confidence amongst the UK trading partner nations, as government spending drives growth in the US, and China continues to enjoy steady growth.
How will growth at Heathrow affect the UK?
As the UK’s largest port for non-EU exports by value, the growth of Heathrow will have a direct effect on people across the UK. The Index shows the positive effects of Heathrow’s work in 2017 to increase efficiencies and marginally grow its route network to include new routes from FlyBe and Beijing Capital.
This increase in flights has offset the decrease in sea port freight units leaving the UK in the last quarter of 2017. While positive, this result is not guaranteed for years to come as Heathrow becomes increasingly constrained. An expanded Heathrow will release capacity, allowing connections to 40 new long haul destinations, doubling cargo capacity and ultimately more opportunities for the UK’s export climate.
Previous CEBR research has shown Heathrow’s third runway could add an additional £24,480 of GDP per UK family between 2019 and 2078, compared to another runway at Gatwick.
Now more than ever, the UK needs to secure its status as an outward-looking global trading nation. It is clear that Heathrow is essential to trade outside the EU, but as we continue to operate at capacity, we will jeopardise new routes and trade with the rest of the world.
John Holland-Kaye, Heathrow CEO
Commenting on the Index, Heathrow Chief Executive John Holland-Kaye said, “Now more than ever, the UK needs to secure its status as an outward-looking global trading nation. It is clear that Heathrow is essential to trade outside the EU, but as we continue to operate at capacity, we will jeopardise new routes and trade with the rest of the world.”
“True transformative change to our flight network – and consequently the UK’s export climate – will only be achieved through the our expansion so we can connect all corners of the UK to the growing markets of the world.”
How does the Export Climate Index work?
The eight measures in the export climate index are: consumer confidence of main UK trade partners weighted by share of UK exports; effective exchange rate; purchasing managers index for UK new manufacturing export orders; assessment of export order-book levels; industrial export expectations; oil price; sea port outward unit growth and growth in number of Heathrow flights.
In order to create the index from the eight measures, Cebr calculated how many standard deviations a single data point deviates from its long-run mean for each set of data included in the index. Cebr then applied a scoring system centring around zero.
This means, the more standard deviations a data point is below the mean, the lower its score and the more standard deviations is above the mean, the higher its score. This exercise was repeated for each of the components. The individual scores are then combined with equal weighting to create the Export Climate Index.