Part of an ongoing “Economic Myths Debunked” series.
I am going to be as brief as possible and use mostly diagrams. All data is from the Office of National Statistics, an independent body operating at arm’s length from Government as a non-ministerial department, directly accountable to Parliament.
UK Balance of Payments under Labour
The graph above shows that the UK balance of payments as a proportion of GDP decreasing significantly over the Labour years (red bars), from just over minus three per cent to just under minus seven per cent. It appears that imports exceeded exports by over twice as much by 2010.
Here is some of that data in monetary terms, and it seems to look even worse:
Below is the rest of the balances of payments dataset going back to 1950. The big spike down is 1973 (OPEC 1973 oil crisis) and the big spike up is 1980 (the 1970s North Sea oil discovery exports thanks to 1979 oil crisis) .
I will leave interpretation up to the reader of how the long view of UK exports looks according to the data.
US Balance of Payments
However, the UK was not alone in seeing balance of payments fall over a similar period. Here is the US balance of payments from 1960 as a percentage of their GDP.
The chart bears perhaps a striking resemblance to the UK balance of payments.
UK exports to the EU
The graph shows a stead increase in the value of exports to both EU and Non-EU counties over the Labour years. Not an astonishing amount, but an increase of between 60 and 80 per cent.
UK Manufacturing Output
The chart shows that manufacturing output in the UK shrank in six out of the 13 of the Labour years. However, one must take in to account the world wide recession which started after the financial crash in the autumn of 2008.
One must also look at a longer range dataset which goes back from 2012 to 1990 and shows that over all during the 90s manufacturing output had risen to a peak in 200, and effectively stabilised over the 00s until the financial crash. It still hasn’t recovered much above 1990 levels.
The 00s saw the rise of the so-called BRIC economies and the graph above shows, overall, the BRIC countries’ share of total UK imports has increased from 3.3% to 11.6% over the last 15 years (ONS).
However, at an aggregate level, UK exports to the BRIC countries as a percentage of total UK exports have increased from 2.6% to 9.1% over the last 15 years, 6.0 percentage points of this rise having occurred since 2006.
UK balance of trade with China
It is worth looking a little closer at the balance of trade with China over the last 15 years to get a real perspective of how the rise of low cost goods from a rapidly growing economy has effected the UK’s manufacturing industries. From 1997 to 2010, the UK’s monthly trade deficit with China grew from around £100m to an astonishing £2,250m.
The evidence seems to initially suggest that manufacturing exports declined rapidly during the Labour years 1997-2000. However, that is a misleading picture when one takes into account the value of exports in total.
Whilst it is true that manufacturing in the UK saw a small decline in the 00s, the biggest reason for decline was the global financial crash of 2008 which saw output collapse around most of the ‘developed’ world. This was balanced by the BRIC countries whom managed to weather this decline, but likewise our exports to those nations remained stable too from 2008 onwards.
Did UK manufacturing exports halve under Labour?
On balance it would seem that this is unproven: our exports did rise a little, but our imports rose dramatically.