Briefing Paper 22 – September 2018
Download Briefing Paper 22
Ingo Borchert and Nicolo Tamberi
Key points
Introduction
Mode 5 services exports by region
Foreign services, international integration and exports
Conclusion
References
Footnotes
Key Points
This Briefing Paper highlights the importance of services inputs—domestic as well as foreign ones—for UK manufacturing exports. We provide a detailed picture of individual UK regions and nations’ usage of domestic services inputs, and we describe the conducive role of foreign services inputs for export success.
- As the result of a long-running trend called “servicification” of manufacturing, the value of UK manufacturing exports entails a considerable share of services inputs.
- In 2017, the value of domestic services inputs into UK manufacturing exports amounted to over £70 billion. By comparison, this is close to all direct exports of financial and insurance services combined. Hence, any changes in market access conditions abroad, especially in EU-27 destination markets, are likely to have knock-on effects on the demand for services in the UK, and on the jobs associated with the provision of such services.
- Across individual regions, the South East and London together provide 25% of all services inputs embodied in UK manufacturing exports. Most other regions contribute between 5-10% each, or £3-7bn, of services inputs to their exports. Northern Ireland, the smallest individual contributor, still exports nearly £2 billion of services embodied in manufacturing products.
- Compared to direct (cross-border) exports of services, in which case London and the South East account for nearly two-thirds of national services exports, indirect services exports are spread out much more evenly across the 12 UK regions and nations.
- Most regions export to EU and non-EU destinations in roughly equal measure, and thus there is no region in the UK that would be insulated from the impact of Brexit.
- Manufacturing exports also use a good deal of foreign services inputs. The share of foreign services value added in UK manufacturing has been rising over the past decade. This trend reflects a process of deepening international integration.
- This process of international integration matters for exporting success: those regions that have come to rely more on foreign services inputs have seen an above-average growth rate of their manufacturing exports. These regions also tend to become more open, i.e. a larger share of manufacturing output is shipped abroad.
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Charlotte Humma September 7th, 2018
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