The total value of UK goods and services exports will increase by 8.5% a year over the next 10 years, according to ITEM, with the total value of UK goods and services into the BRIC countries to increase by 11.7% a year to 2020.

Following a period of negative growth over the last two years (2008- 2010) when the total value of goods and services exported overseas dipped by -1.8% a year, opportunities to increase the UK's market share in traditional strongholds, such as Europe and the US, are also likely to increase in value by 7.8% and 8.6% a year respectively – boosted by the steep devaluation in the pound over the last three years, adding to the UK's competitiveness.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, believes that these positive factors should mean that net exports contribute around 0.5% a year to GDP growth over the next five years.

The forecast implies some significant structural shifts for the UK, driven by export re-orientation towards emerging markets and competitiveness. The UK has been slower than its competitors to penetrate the BRICs so far, but recent trade figures suggest that the UK's reorientation towards the BRICs has now started in earnest.

Just 5% of UK exports currently go to the BRIC economies and ITEM is urging government to continue engineering policy towards supporting competitiveness.

Goodwin remarks, "The government has an important role to play in facilitating the re-orientation of exports towards emerging markets and breaking down the regulatory barriers for companies that wish to break into those countries by developing strong relationships with their governments. Government policy should also be focused on supporting competitiveness through improving skill levels and providing incentives to invest, which would help to close the productivity gap with Germany."

Weak pound provides long term boost

The weak pound provides UK exporters with a major competitive advantage, giving them greater ability to compete on price with low cost competitors from Germany and the US. With the Bank of England expected to maintain a loose monetary policy, to offset the impact of very tight fiscal policy, ITEM expects sterling to remain low for a prolonged period, which should be enough to make a difference to UK exporters.

Rising middle class will increase demand for UK goods

According to the report, UK goods exporters are also set to benefit from growing consumer demand from the emerging markets. While cash strapped consumers in the UK continue to feel the impact of tax increases, austerity measures and depressed wage rises, strong economic growth in the BRIC economies will see the average household income rise by 14% a year to 2020.

Improving living standards and the rapid expansion of the middle class in the BRICs, will also deliver a significant increase in consumer demand for electrical goods and high tech products - traditional strongholds for UK exporters. ITEM is predicting that the total value of UK goods exports to the BRICs will increase by 11.8% a year in the next 10 years, underpinning growth in total goods exports of 8.7% a year.

The top performers by sector, based on annual growth, are electrical goods (11.6%), optical and high-tech goods (10.4%) and minerals & metals (9%).

UK continues to excel in financial services

ITEM says that service sector exports will continue be key to UK export performance over the next 10 years, with predicted growth of 8.4% a year overall and exports of services to the BRICs forecast to grow by 11.5% a year. Financial services are expected to make the biggest contribution, with growth of 9.9% a year in the next decade.

Goodwin adds: "We're not going to see a dramatic shift in the type of products or services the UK exports over the next 10 years. Our existing specialisms in financial services and high tech products are where we have the skills, labour and the biggest competitive advantage."

Learning lessons from Germany

ITEM warns that the UK's long term export performance will, however, require a change in strategy. Goodwin says that if the UK is to compete with established exporters such as Germany, significant investment is required in productivity enhancements to compete head-to-head. But this a long-term process, achievable only through structural reform of the education system and improving incentives to firms to invest in research and development.

Goodwin concludes, "A weak pound is giving UK exporters a significant, but temporary, boost to competitiveness. The UK needs to be looking to the lessons learned from Germany, which has consistently achieved greater improvements in competitiveness than the UK, if it is to become a major player in export markets over the longer term."

Going Global betterbusiness Workshop

On the 9th March 2011 Entrepreneur Country and Nabarro LLP will be hosting 'Going Global', an event specifically for UK businesses looking to expand their markets abroad. The event in association with UKTI will include a host of keynote speakers including the UK Trade and Investment Minister Lord Green, author of Go Global Emma Jones and Quickstart Global CEO Neal Gandhi.

For more information and tickets please click here