UK trading partners and trade relationships: 2020

• The top five UK trading partners by total trade in goods, excluding unspecified goods in the first half (January to June) of 2020 were the United States (US), Germany, China, the Netherlands and France; they accounted for 46.0% of UK total trade in goods, excluding unspecified goods in this period.
• The proportion of goods imported from non-EU countries has increased from 45.6% in Quarter 2 (Apr to June) 2019 to 47.3% in Quarter 2 2020.
• The US had the largest positive impact on the underlying total trade balance, largely because of services exports of £39.0 billion in the first half of 2020.
• China contributed £13.6 billion to the UK underlying total trade deficit in the first half of 2020, more than any other country in this period.
• Characteristics of bilateral trade are unique to each trading partner: imports of road vehicles were the main drivers of UK trade with Germany and Japan, whereas mining machinery exports and imports of non-ferrous metals defined the trade relationship the UK has with Australia in the first half of 2020.

This article provides an economic analysis of the contemporary international trade relationships the UK has with its largest trading partners. These have been identified based upon total trade in goods, excluding unspecified goods for Quarter 1 (Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020 (Figure 1)¹.

The United States (US) was the largest trading partner by underlying total trade in goods² in Quarter 1 2020 and Quarter 2 2020. This was largely because of goods exported to the US accounting for 16.2% of all goods exported from the UK in Quarter 1 2020 and 14.7% in Quarter 2 2020. China was the only country in the top five that increased their total trade in goods with the UK between Quarter 1 2020 and Quarter 2 2020. This was owing to a 17.2% increase in goods imported from China during this period.

Figure 1: The UK’s top five trading partners accounted for 46.0% of total trade in goods, excluding unspecified goods, in the first half of 2020

UK total trade in goods excluding unspecified goods, top 5 partner countries, Quarter 1 (Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June).

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In addition to the UK’s top five trading partners, we also analyse the UK’s trade relationships with countries the UK is currently negotiating, or has recently completed trade negotiations with. A Comprehensive Economic Partnership Agreement has been made with Japan, and Free Trade Agreement negotiations are currently underway with the United States (US), New Zealand and Australia. Trade agreement negotiations are also still ongoing between the UK and the EU.

The up-to-date analysis of existing trade relationships with these partner countries serves as a baseline to enable us to better understand the impact of any forthcoming developments.

As such, the trading partners we are exploring in this release are:

• United States
• Germany
• China
• Netherlands
• France
• Japan
• Australia
• New Zealand

This release compares published Office for National Statistics (ONS) data for Quarter 1 2019 and Quarter 2 2019 and Quarter 1 2020 and Quarter 2 2020 (see Related links). These time periods cover the UK’s national lockdown in response to the coronavirus (COVID-19) pandemic, announced on 23 March 2020, and the subsequent easing of restrictions from the beginning of June 2020.

Most of the UK's top trading partners have been affected by the coronavirus, and published data suggests evidence of coronavirus-related impacts on UK trade. The greatest impacts were seen in the import of machinery and transport equipment, which fell by 34.6% in Quarter 2 2020 compared with Quarter 1 2020; the largest decrease was seen in imports of machinery and transport equipment from Germany, falling by 50.7%.

In the first half of 2020, the UK underlying total trade balance increased by £27.0 billion to £10.4 billion when compared with the same period in 2019. Imports and exports of both goods and services decreased during this period, with exports decreasing less than imports for both categories. Table 1 shows that of the UK’s top five international trading partners, the UK maintained the largest trade surplus with the US in the first half of 2020; UK trade with China contributed most to the underlying trade deficit in this period.

By looking at trade in services in more detail, Figure 2 shows that in the first half of 2020 (January to June 2020), the US accounted for the largest proportion of services exports. Services exports to the US accounted for 27.7% (£39.0 billion) of total UK services exports in the first half of 2020. This is largely driven by exports of “professional and management consulting services” and “explicitly charged and other financial services”³.

Figure 2: The US contributed the largest proportion of imports and exports across the top five service types except for intellectual property imports

UK trade in goods top five commodity groups, imports and exports by partner country, as percentage of total, Quarter 1 (Jan to Mar) and Quarter 2 (Apr to June) 2020 combined

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When looking at trade in goods by commodity group, Figure 3 shows the UK imported more from Germany in the first half of 2020 than from any other trading partner, which represented 12.6% (£24.3 billion) of total goods imported by the UK. In the first half of 2020, imports of road vehicles from Germany accounted for 31.4% (£5.7 billion) of the UK’s total road vehicle imports (Figure 3).

The largest recipient of UK exports in the first half of 2020 was the US, accounting for 15.5% of all UK goods exported. Of the top five largest export commodity groups presented in Figure 3, oil is the only commodity in which the UK does not export the highest proportion to the US, with the largest proportion of oil (37.9%) being exported to the Netherlands in the first half of 2020.

Figure 3: The UK imported more goods from Germany than any other trading partner in the first half of 2020

UK trade in goods top five commodity groups, imports and exports by partner country, as percentage of total, Quarter 1 (Jan to Mar) and Quarter 2 (Apr to June) 2020 combined

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Notes for: UK trade with partner countries

1. Total trade in goods excluding unspecified goods is total exports plus total imports. This method of assessing size of trade relationship was selected as granular trade in services data for this period was not available at time of writing.

2. All references to trade in goods are non-seasonally adjusted and exclude unspecified goods because of volatility in this commodity group, unless otherwise specified.

3. For more information regarding service type definitions please see UK trade in services by partner country: July to September 2019.

The proportion of goods imported from non-EU countries has increased from 45.6% to 47.3% in Quarter 2 (Apr to June) 2020 compared with the same period in 2019 (Figure 4).

Figure 4: Exports of goods to non-EU countries constitutes over half of UK goods exports

UK trade in goods excluding unspecified goods, imports and exports by EU and non-EU split Quarter 1 (Jan to Mar) 2019 to Quarter 2 (Apr to June) 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (Jul to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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The increase in proportion of goods imported from non-EU countries was driven by goods imported from China. Between Quarter 1 2020 and Quarter 2 2020, road vehicles imports from EU countries saw a decrease of 66.6% and a smaller decrease of 47.3% from non-EU countries. Looking at this in more detail, we can see that this is largely because of falling imports from Germany and a lesser reduction in imports from Japan. Sections 4 and 5 will provide a more detailed analysis of UK trade relationships at the country level.

This section provides a detailed analysis of UK trade relationships focussing on non-EU partner countries. The partner countries covered in this section are the United States (US), China, Japan, Australia and New Zealand. The analysis will focus on the service type or commodity group that accounts for the largest proportion of trade with each partner country.

United States: Exports of services to the US show resilience to the current economic downturn

The US represents the largest proportion of trade across all categories aside from UK imports of goods (Figure 2 and Figure 3). The UK exported more road vehicles to the US than it did to any other partner country, exporting 19.8% of all road vehicles to the US in the first half of 2020. The United States Census Bureau reported that the UK was their largest trade in services partner. In the first half of 2020, the UK accounted for 8.9% of US services exports and 11.0% of US services imports (Exhibit 20b).

Figure 5 shows there was a particularly small decline of 9.7% in UK exports of services to the US between Quarter 1 (Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020, relative to the greater decrease of 12.2% in total UK services exports in this period. Further falls in total services exports were bolstered by the relative resilience of exports of legal accounting, management consulting and public relations services, which accounted for 15.3% of all UK service exports in Quarter 2 2020.

The relatively small decline of 3.6% between Quarter 1 2020 and Quarter 2 2020 in total UK exports of legal accounting, management consulting and public relations services is attributed to the increase of £0.2 billion (5.3%) in exports of this service type to the US during this period (Figure 5). UK exports of legal accounting, management consulting and public relations services to the US accounted for 5.4% of total UK services exports in Quarter 1 2020 and 6.4% in Quarter 2 2020.

An important contributing factor to the limited impact on exports of services to the US is likely to be the mode by which these services are provided. It was estimated that in 2018, 72% of UK exports of services to the US were provided remotely.

Figure 5: UK exports of legal, accounting, management consulting and public relations services to the US increased by 5.3% between Quarter 1 2020 and Quarter 2 2020

UK trade in services with the US by top five service types, Quarter 1 (Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar) and Q2 refers to Quarter 2 (Apr to June).

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China: The UK imported 13.4% of all goods from China in Quarter 2 2020

The UK imported more goods from China (£11.0 billion) than from any other trading partner in Quarter 2 2020. This was the first quarter that China accounted for the largest proportion of UK imports of goods. The proportion of UK imports received from China increased from 8.6% in Quarter 1 2020 to 13.4% in Quarter 2 2020.

Electrical machinery was the largest commodity group imported from China in Quarter 2 2020, accounting for 35.2% (£3.9 billion) of all goods imports. It was also the second largest commodity group in Quarter 1 2020, representing 33.3% (£3.1 billion) of total goods imports (Figure 6).

The UK imported 25.6% of all electrical machinery from China in the first half of 2020. This was mainly telecommunication and sound equipment, and office machinery, which mostly includes consumer electronic devices such as smartphones, tablets and laptops. These accounted for 37.9% and 36.4% respectively of electrical machinery imported from China in this period.

Of mobile telephones exported globally in 2019, 46.9% were reported to come from China with many of the world leading smart phone brands being located in China or having manufacturing facilities in located in China.

Figure 6: UK imports of electrical machinery from China increased between Quarter 1 and Quarter 2 2020

UK imports of goods from China, Quarter 1 (Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar) and Q2 refers to Quarter 2 (Apr to June).

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Japan: The UK’s largest non-EU import partner for road vehicles in the first half of 2020 was Japan

The UK trade relationship with Japan is defined by road vehicles and the machinery and parts needed to manufacture road vehicles. Japan was the UK’s sixth largest import partner for road vehicles in Quarter 1 2020 and Quarter 2 2020, accounting for 4.8% and 6.1% of the total road vehicles imported respectively. Japan was also the UK’s largest non-EU road vehicle import partner in the first half of 2020.

Figure 7 shows that of the UK’s top five non-EU road vehicle imports partners, Japan was the only country in which the total value of the road vehicle imports increased from the first half of 2019 to the first half of 2020. Road vehicle imports from Japan increased from £890.9 million in the first half of 2019 to £934.3 million in the first half of 2020.

Although there was an increase in road vehicle exports from Japan from the first half of 2019 compared with the first half of 2020, the value of road vehicles imported to the UK from Japan in Quarter 1 2020 was £639.1 million, which fell by £344.0 million (53.8%) in Quarter 2 2020.

According to the Society of Motor Manufacturers and Traders (SMMT), Japanese car manufacturing plants account for around half of all cars produced in the UK. When splitting car manufacturing by car manufacturing for home or export, SMMT reports that of the 381,312 cars produced in the UK in the first half of 2020, 81.0% were for export markets.

As such, the production and export of Japanese cars in the UK accounted for a large proportion of UK trade in goods in the first half of 2020, although further analysis is needed to quantify trends. From this we can see that, as one of the top 16 car manufacturers in the world, the UK draws heavily on imports of Japanese machinery and transport equipment, and the manufacturing of cars by Japanese plants in the UK for export markets.

Figure 7: The UK imported more road vehicles from Japan than any other non-EU country in the first half of 2020

UK imports of road vehicles from the top five non-EU countries, first half of 2019 and the first half of 2020

Notes:

1. Jan - Jun is January to June.

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Australia: Over 15% of total exports to Australia in the first half of 2020 were in mechanical machinery

Australia accounted for 0.4% of UK goods imports and 1.3% of UK goods exports in the first half of 2020. The top commodity group imported from Australia in the first half of 2020 was non-ferrous metals, accounting for 15.9% of all UK imports from Australia. UK imports of non-ferrous metals increased between Quarter 1 2020 and Quarter 2 2020 to £70.6 million. This helped sustain total UK imports from Australia in this period, which increased by 1.5%.

HMRC data report that a large proportion of this was lead. The Australian inquiry into Australia’s trade and investment relationship with the UK identified Australia as the world’s largest exporter of lead and UK imports of lead from Australia accounted for 43.6% of their total lead exports in 2015. It also notes that the largest application for lead is for use in batteries for transport vehicles, and as such, lead imports from Australia are an integral link in the supply chain for the manufacturing of road vehicles.

Mechanical machinery accounted for 15.5% of all UK exports to Australia in the first half of 2020. Intracen data show that a large proportion of the mechanical machinery exported to Australia in 2019 was specialist mining equipment for crushing or grinding minerals (14.8%) used in the extraction and processing of mining materials. Intracen also places the UK as the third largest global exporter of this specialist mechanical machinery.

The Australian bureau of statistics reports that the mining industry is the largest in Australia in terms of earnings before interest, tax, depreciation and amortization (EBITDA). Price Waterhouse Cooper also reports that the top two global mining companies are also based in Australia. As such, much of UK trade with Australia is defined by the mining industry.

Figure 8: Three of the top five commodities imported from Australia in the first half of 2020 were mining products

UK imports from Australia by commodity, Quarter 1(Jan to Mar) 2020 and Quarter 2 (Apr to June) 2020

Notes:

1. Q1 refers to Quarter 1 (Jan to Mar) and Q2 refers to Quarter 2 (Apr to June).

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New Zealand: The UK’s second largest meat and meat preparations import partner outside of the EU was New Zealand, accounting for 4.8% of total UK meat imports in the first half of 2020

New Zealand accounted for 0.2% of all UK imports of goods in the first half of 2020. However, New Zealand contributes 4.8% of meat and meat preparation imports, making it the UK’s seventh largest meat import partner. Almost all meat exported by New Zealand to the UK in the first half of 2020 was lamb (96.2%). Intracen data show meat is New Zealand’s second largest export commodity accounting for 16.1% of New Zealand’s global exports in the first half of 2020.

Unlike many other countries, total imports from New Zealand increased by 13.2% between Quarter 1 2020 and Quarter 2 2020. The top two commodities imported from New Zealand were beverage and food and live animal categories. Both of these categories were resilient to the impact of the coronavirus (COVID-19), where total UK imports of beverages increased by 14.0% and total food and live animal imports increased by 0.2% from Quarter 1 2020 to Quarter 2 2020.

This section provides a detailed analysis of UK trade relationships with EU partner countries. The partner countries covered in this section are Germany, France and the Netherlands. The analysis will focus on the commodity group that accounts for the largest proportion of trade with each partner country.

Germany: The UK’s largest EU trading partner for goods import and exports in the first half of 2020 was Germany

Germany is the UK’s largest EU trading partner, accounting for 13.4% of UK goods imports and 10.7% of goods exports in Quarter 1 (Jan to Mar) 2020, although this fell to 11.6% and 10.2% respectively in Quarter 2 (Apr to June) 2020.

As noted in Section 2, the UK imports more road vehicles from Germany than from any other country (Figure 3). Figure 10 shows that, while the total value of road vehicles imports decreased by £3.1 billion (70.2%) between Quarter 1 and Quarter 2 2020 to £1.3 billion, road vehicles still constitute the largest proportion of UK imports from Germany, falling from 29.7% in Quarter 1 2020 to 13.6% in Quarter 2 2020.

UN Comtrade data show that Germany exported 48.3% fewer motor cars in Quarter 2 2020 compared with Quarter 1 2020. Germany exports more cars to the UK than it does to any other country, having exported 711,266 (15.8%) cars to the UK in 2019.

While this drop in UK imports of road vehicles from Germany is likely a consequence of the global coronavirus pandemic, imports from Germany have decreased to a greater extent than the rest of the world. Comparing the first half of 2019 with the first half of 2020, imports of road vehicles from Germany fell by 45.1% whereas imports from the world as a whole only fell by 39.3%.

France: The UK’s largest aircraft part export partner in the first half of 2020 was France, receiving 25% of all aircraft and aircraft parts

The UK exported more aircraft and aircraft parts to France than it did to any other country in Quarter 1 2020. Exports of aircraft and aircraft parts accounted for £1.0 billion or 30.3% of UK aircraft exports in Quarter 1 2020. This decreased by £0.7 billion to 15.6% in Quarter 2 2020 largely as a consequence of the coronavirus pandemic.

Intracen reports that France has maintained its position as the largest global exporter of powered aircraft since at least 2001. The Organisation for Economic Co-operation and Development (OECD) reports that while the aviation industry as a whole in France only represents a small share of total value added (1.2%, in 2017), it is an important part of the French economy, with the Financial Times noting that it is directly or indirectly employing 300,000 people.

From HMRC data we see that 89.6% of goods exported from the UK to France in the “aircraft” category are aircraft parts (that is, components). Intracen data show that the UK is the global leader in the export of aircraft parts and in 2019 UK exports of aircraft parts accounted for 17.2% of global exports in this category. The Institute for Mechanical Engineers reports that many of the top 10 global aerospace companies have manufacturing facilities in the UK or are UK companies.

Netherlands: The UK exported more oil to the Netherlands than to any other country in the first half of 2020

The UK exported more oil to the Netherlands than to any other country in the first half of 2020, with 37.3% of all UK oil exported to the Netherlands in Quarter 1 2020 and 38.8% in Quarter 2 2020. Figure 12 shows that oil was the largest commodity group exported to the Netherlands in the first half of 2020 accounting for 41.0% (£4.1 billion) of total UK exports to the Netherlands.

In addition to the oil used domestically, the large distillation capacity of the Netherlands enables them to refine the oil products received from the UK, which can then be re-exported largely within other EU markets. Crude oil is also re-exported from the Netherlands to refineries in other EU countries via pipelines from the port of Rotterdam.

Exports

Goods or services sold to other countries – the opposite of imports.

Imports

Purchases of foreign goods and services – the opposite of exports.

Total trade

The value of total trade between two trading partners (i.e. exports plus imports).

Trade balance

The trade balance is the difference between exports and imports or exports minus imports. When the value of exports is greater than the value of imports, the trade balance is in surplus. When the value of imports is greater than the value of exports, the trade balance is in deficit. The balance is sometimes referred to as “net exports”.

UK trade data

UK trade data used in this article, unless stated, are non-seasonally adjusted, in current price, meaning they have not been adjusted to remove the effects of inflation and seasonality.

It is also worth noting that UK trade has seen challenges with data collection because of social distancing measures as a result of the coronavirus (COVID-19). These have largely affected both the International Trade in Services (ITIS) Survey and the International Passenger Survey (IPS).

Further detail on the challenges and the measures we have taken can be found in Section 11 of the UK trade release published 12 June 2020.

Trade asymmetries

UK trade data used in this publication are our best estimates of bilateral UK trade flows, compiled following internationally agreed standards and using a wide range of robust data sources. However, in some cases alternative estimates of bilateral trade flows have been used from the statistical agencies for those countries or through central databases such as UN Comtrade.

Differences between estimates are known as trade asymmetries and are a known aspect of international trade statistics, affecting bilateral estimates across the globe, not just in the UK. Where these alternative data sources have been used, care has been taken to not make comparisons across datasets.

We are heavily engaged in analysis of these asymmetries, developing strong bilateral relationships with other countries to understand, explain and potentially reduce them. We have produced a series of analyses showing comparisons and the relative strengths of different estimates, which users may wish to reference to help them better understand the quality of our bilateral trade estimates.