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Exports to lead the recovery?

25 January 2013

With domestic demand stymied by the continuing slow recovery in the services sector and the public sector locked firmly into austerity mode, it is clear that the main driver for growth in manufacturing has to come from ove

With domestic demand stymied by the continuing slow recovery in the services sector and the public sector locked firmly into austerity mode, it is clear that the main driver for growth in manufacturing has to come from overseas.Paul O'Donnell, head of external affairs at the Manufacturing Technologies Association (MTA) comments

While much of the West continues to be beset by the fallout of the recession right across the world there are many economies experiencing strong growth. The most spectacular is China with India not too far behind, but countries like Indonesia and Turkey are growing too.

Even in the more developed world there are places, like Germany, which are going full steam ahead - often on the back of strong exports to the emerging markets.

It is therefore no surprise that British companies should want to take a piece of the action for themselves. The good news is that many of them are doing so; the bad - or maybe that should be 'could be better' - news is that they are not always able to compete on a level playing field. The Government has put export promotion centre stage in its bid to rebalance the economy and David Cameron has led high profile trade missions to China, India and the Middle East. The Government has also published a White Paper on Trade which looks at what can be done to improve Britain's performance in this area.

There are two areas of the White Paper that the Manufacturing Technologies Association particularly welcomes. The issue of trade finance is a vexed one with British companies often at a disadvantage in relation to their competitors who frequently have more supportive banks. Problems like Banks' practice of setting the value of deposits against existing facilities, while probably not peculiar to Britain are more widespread here.

The White Paper had some good signs of progress in terms of the Banks' attitudes, progress that we at the MTA have seen mirrored in our discussions with Lloyds Banking Group, an MTA member. The new products that the sector, led by Lloyds, is working on, if - and it is a big if - properly implemented, may make a real difference to smaller firms who struggle with trade finance.

The other area where progress seems to be being made is in relation to the Export Credit Guarantee Department - the Government agency that should step in when commercial sources of finance prove hard to find to back deals. Industry has long complained that ECGD has not been performing this function and has had far too narrow a focus on a single sector - aerospace, writing over 90% of its business there. It was a theme that the MTA's director general, Graham Dewhurst, struck when he appeared before the House of Commons Business Select Committee in late January and we were pleased that his criticisms and those of others seem to have been taken on board with a strong looking set of reforms proposed to widen ECGD's remit and encourage more businesses to use them.

It's not just in Westminster that the MTA has been making its views known on trade policy. Through our offices in China and Russia, as well as through our partner associations in Brussels, we have been active in promoting British business.We are leading a mission to China in April centred around a UK pavilion at the China International Machine Tool show and will take another group of companies to Germany later in the year. The fact that we engage in active trade promotion for our member companies gives our policy messages greater weight. It is a real example of where the mix of a trade association's activities helps to magnify the message.
 
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