1. The UK must strengthen links to emerging and developed markets to reflect the changing world

Chapter 1 - The UK must strengthen links to emerging and developed markets to reflect the changing world

The world’s economy is in the midst of an historic upheaval from developed to emerging countries that requires evolution of Britain’s global role and economic strategy. Rapid growth in the emerging world is both taking global growth to unprecedented highs and shifting the world’s centre of economic gravity eastwards. The impact of the financial crisis in the developed world, which is set to depress growth for some years to come, has accelerated the shift in relative economic clout. Britain needs to build trading links with emerging economies at the same time as maximising trade with established markets.

Despite some progress in recent years, Britain’s trade links are strongly tilted towards the slow-growing western European Union countries (rather than the faster-growing eastern European members), the United States and other developed economies. As global economic weight shifts towards emerging and developing economies, the UK must adapt to take advantage of new trading and investment opportunities.

However, it is unlikely that the UK will totally shift away from the trading and investment partners of today, since there are compelling economic fundamentals that make trade between advanced economies, especially those clustered in a region, particularly important. In addition, there is already substantial integration of the British and European economies.

This means that the UK’s trading relationship with the EU will remain of great importance regardless of the nature of formal relations. When planning its global future, the UK does not face an either-or choice between the emerging world and its current principal trading partners in the European Union and United States. With its diverse economy, a confident country like the UK needs to maximise trade with existing large markets at the same time as building links to new markets to take advantage of opportunities wherever it finds them.

1.1 The rise of emerging markets is reshaping the world’s economic geography

In the period from the end of the Asian financial crisis in 1999 through to 2012, emerging and developing economies expanded by 118% while developed economies grew by just 26%. This means that this year will be the first in which the developed world takes a minority share of global GDP (49.1%).[1] It is forecast that non-OECD countries will account for around 55% of global growth from 2012 to 2025,[2] and IMF projections show developing and emerging economies’ share of global GDP increasing further to 55.1% by 2018 (see Exhibit 1).[3]

Exhibit 1: As the world economy grows, emerging markets will take an increasing share

According to the latest PwC forecasts, by 2050 China, India, Brazil, Russia, Mexico and Indonesia will all have larger economies than any European Union country (see Exhibit 2). The UK will not suddenly be eclipsed on the world stage – indeed it will remain one of the world’s largest economies and double in size by 2050 – but while it may remain in the Premier League of world economies, as was the case throughout the 20th century, it will rank mid-table at around 11th place by 2050.[4]

Exhibit 2: Today’s emerging economies will dominate the top 10 in 2050

interactive icon View Interactive Exhibit 2

Three key trends are driving this growth in the emerging economies.

1

Catch-up and convergence. Developing economies are converging towards the technological and income levels enjoyed by the developed world. Globalisation and increased trade openness are pushing forward this process, as interaction, trade and learning allow emerging countries to catch up with developed markets and leapfrog intermediary technologies. Trend per capita growth in emerging and advanced markets diverged around the turn of the century and today is around twice as fast in the former (see Exhibit 4).

There is a vast amount of room for emerging and developing markets to grow further. Although they currently account for around half of global GDP, their share of the population comes to around 82%. Furthermore, most of the gains in share of global GDP over the last 15 years have accrued to emerging markets in Asia.[5] In future decades, a broader range of emerging markets in South America, Africa and elsewhere are likely to gain clout on the world stage.

2

Increasing prosperity and growing middle-class consumption. The world’s middle class is forecast to expand by over two billion households by 2030 with around 90% of that expansion located in the Asia–Pacific Region.[6] The emerging middle classes will have greater disposable income, which will lead to increased consumption and savings and investments that will in turn further drive economic growth.

3

Urbanisation. The economies of scale unleashed by the development of cities is one of the most powerful drivers of productivity in global markets. There remains huge scope for further gains, however, even in high-growth emerging markets. The urban population in developing countries stood at 45% of their total population in 2010 compared with 75% in developed countries. The urban population is expected to rise four times as quickly to 2020.[7]

Most of the shift in the world economy from advanced to developing countries will be concentrated in a clutch of newly arriving global cities. Around 44% of the world’s economic growth to 2025 is forecast to come from 420 emerging market cities with two-thirds of that from cities in China. As much as 8% of global growth will come from emerging-market megacities with over 10 million inhabitants.[8]

Exhibit 4: Emerging and developing economies have been enjoying much faster growth than developed economies since the turn of the century

1.2 Growth in the developed world will be constrained for the foreseeable future

The shift in global economic power towards emerging markets is also partly explained by sluggish growth in developed countries. It is forecast that the UK will be the fastest-growing of the EU’s five largest economies over 2012 to 2023 with annual growth of 1.7%, while Germany is expected to grow by 1.4%, France by 0.9%, Italy by 0.4%, and Spain by 0.3%. US growth is not projected to be much faster, at 2.0%, though some developed economies with a larger resource endowment and less overhang from the financial crisis may grow a little faster, such as Canada and Australia (2.3% and 3.0% respectively).[9]

Three key trends are limiting growth in the developed world.

1

Over-hang from the financial crisis. The aftermath of the financial crisis is likely to depress growth in the developed world for some years to come. It is well established, empirically, that recessions following financial crises tend to be longer and deeper than average. A recent IMF study, for example, found that recessions following financial crises last an average of 5.7 years in industrial economies, whereas the average recession lasts 3.6 years.[10] The special circumstances of the Eurozone crisis and the ensuing employment crisis are set to depress growth in Europe even further as periphery countries struggle to rebalance and regain competitiveness without recourse to currency devaluation. Past episodes of deleveraging suggest that developed economies generally face at least 3–5 more years before any ‘catch-up’ growth towards the pre-crisis trend is likely to emerge.[11]

2

Ageing populations. Even beyond the present downturn, the ageing of developed countries’ populations will restrict overall growth and, even more so, growth per capita as the working age share of the population declines. The global median age is increasing by an average of around 2.6 years every decade, with developed countries predominantly affected (the notable exception being China, whose median age is already above that of the US and will overtake Europe’s in the next 20 years).[12] A UN analysis forecasts that demographic change will subtract 0.3% per annum from EU15 and US growth over 2010–20 and 0.5% and 0.4% respectively over 2020–30[13] – and age-related public spending is expected to increase by around 4–5% by 2030, squeezing spending in other areas.[14]

3

Fewer ‘quick wins’ available from technological catch-up. Developed economies have less potential for growth through capital accumulation and technological catch-up. Despite the remarkable growth of emerging and developing markets in recent years, the developed world’s income per head was still almost six times greater in 2012 in purchasing parity terms.[15] That gap in incomes per head and, possibly, the associated catch-up growth will last well beyond the point at which the world’s major emerging economies surpass today’s G7 in terms of total GDP.

The size and high income of developed economies means that they will continue to prosper, growing in absolute terms in the coming years. While these countries will continue to be important markets for many firms, global trends suggest that many companies looking for high-growth opportunities rather than just maintaining existing sales will have to look outside the developed world.

1.3 The UK must do more to create trade and investment links with high-growth markets, but this will take time

Today, the bulk of Britain’s exports go to economies in the EU15 and the US which are also suffering from the after-effects of the financial crisis and whose share of global economic activity is falling. In 2012, the US accounted for the single largest share of UK exports (17.1%) and also the largest trade surplus, at £33.5bn. The US was followed as the UK’s major export partner by Germany (8.8%), the Netherlands (7.0%), France (6.1%) and Ireland (5.5%). The EU27 overall accounted for 45.1% of exports – much more than any other standalone, single market. By contrast, only 2.8% of exports went to China and 6.6% to the four BRIC countries in total – less than the Netherlands alone. Exports to other major emerging economies, like Indonesia and Mexico, are even smaller (see Exhibit 5).[16]

Exhibit 4: The bulk of Britain's exports go to slow-growing developed economies

Similarly, Britain sources the majority of its imports from developed economies. In 2012, 50.6% of its imports came from the EU27, within which the largest partners were Germany (11.6%), Netherlands (6.8%), France (6.3%) and Spain (4.1%). Outside the EU, the United States is the largest exporter into Britain (9.6%), followed by China (6.3%). Britain sources both final goods and services and intermediate inputs from Europe: in 2009, 47.5% of intermediate inputs were imported from the EU27.[17]

Britain also conducts the majority of both its outward and inward foreign direct investment (FDI) with the EU and United States. Nearly nine-tenths of all net inward FDI into the UK over the period from 2002 to 2011 came from other OECD countries, with the EU25 accounting for 41.5% and the United States 24.6%. Net outward FDI from Britain was also predominantly invested in developed economies – 33.6% of the total in the EU and 20.5% in the United States. There were small shares invested in emerging economies, however, with 2.2% of total new outward FDI going to India and a further 3.8% to the other BRIC countries.[18]

Building links with growing economies is undoubtedly a necessary part of broadening the base of sustainable growth in the UK. While the BRICs – Brazil, Russia, India and China – represent the largest emerging economies, British business also needs to tap into rapid demand growth from the likes of the ‘MINTs’ – Mexico, Indonesia, Nigeria and Turkey – and other members of the ‘Next 11’.

However, creating new trade and investment links with growing markets to match those with existing partners is an extremely challenging proposition. A number of the UK’s comparative advantages and world-leading industries lie in areas that are not currently of top priority to emerging economies, such as financial and business services and high-tech, knowledge-intensive manufacturing (Exhibit 6). Much of the disappointment in UK exports since 2007 has been due to services exports, which edged up only 0.7% between then and 2012.

Exhibit 5: Britain has trade surpluses in services and high-tech manufacturing

In the current phase of rapid industrialisation being experienced by the BRICs and other key emerging markets, demand for capital goods, industrial chemicals and raw materials has advantaged countries with matching export profiles. German exports of chemicals to China increased by 6.2% pa in volume terms over the decade to 2012, and those of machinery & transport equipment grew 3.5% pa.[19] Australia has supplied coal to fuel its power stations, and the Middle East and Africa have supplied the oil and minerals for production processes.

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There are potentially large-scale opportunities for British business in emerging markets.

UK exports to the BRICs and other emerging economies are expanding rapidly: in value terms they have risen by 20.1% per annum over 2002–12 to China; 17.2% to Russia; 11.3% to India; 13.4% to Brazil; 5.9% to Mexico, and 8.1% to Indonesia – but from a very low base.

There are, however, potentially large-scale opportunities for British business in the coming years in emerging markets. Growing prosperity will not only lead to increased overall demand from the emerging world but may also alter the composition of demand in ways that play to the UK’s export strengths in high-end consumer services and goods.

As middle classes grow around the world, there will be an increased demand for banking, and life and health insurance – with great potential for the financial services industry in the City of London.  Middle classes also spend more on healthcare and education – both sectors where the UK has strong brand identity through the NHS and globally renowned academic institutes such as Manchester University (where researchers were recently awarded a Nobel Prize for graphene research) and Southampton University (a world leader in photonics). Top-end UK brands such as Jaguar and Burberry are increasingly favoured by new Asian consumers, and urbanisation may play to British strengths in town planning, design, architecture and infrastructure (See Exhibit 6).

Exhibit 6: UK opportunities in emerging markets

   

Burberry: Sales growth in emerging markets helped push Burberry, the UK-based global luxury brand to record sales in 2012. Sales in China grew by about 20% last year, accounting for 14% of the group's sales. Latin America has also seen strong growth for the company with new shops opening in Brazil and Mexico, and new franchise agreements signed in Colombia and Chile.

     

Experian: As demand for credit grows among the middle classes around the world, Nottingham-based Experian is well placed to capitalise with a presence in Brazil, Columbia and India.

      

Benoy: The award-winning firm of architects, masterplanners, interior and graphic designers is responding to the new demand from governments in the Middle East and India, who are putting more money into housing projects to meet the needs of their populations as they grow, incomes rise and the economies develop.

The UK’s broad range of cross-discipline expertise can also allow for the packaging of product/service combinations that can be exported as holistic solutions to satisfy the demands of emerging economies and their governments. The next pages lay out some of the opportunities and challenges faced by British business in China and India. There are undoubtedly opportunities, but business faces a significant challenge in developing a new product mix, improving competitiveness and overcoming the practical and non-tariff obstacles to trading with and operating in the emerging world. Building links with these high-growth economies will take time.

China

1.4 Britain’s large established markets are likely to be important for some time to come

With substantial challenges to expanding the presence of British firms in emerging markets, the UK cannot afford to ignore the 79% of exports currently going to the EU, US and other developed markets.[35] As exports to these countries start from a much higher base, even a relatively modest improvement in demand and UK market penetration in the EU and US could match the impact from a proportionally more rapid expansion in exports to BRICs.

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The overall size of developed economies means that they are likely to remain key trading partners for the UK.

Furthermore, the overall size of developed economies – and the retention of their places at the world negotiating table that shapes the global trade agenda – means that they are likely to remain key economic and trade partners for the UK. Developed world economies are still large in absolute terms, as well as having a much higher income per capita than emerging market economies: the EU28 and US together accounted for 45% of global GDP in dollar terms in 2012.[36] Despite currently depressed growth rates, the EU28 and US are still expected to be in the world’s top four economies in 2050 and the gap in incomes per head is set to persist for the foreseeable future.

Moreover, especially in Europe, growth rates are by no means uniform across developed markets. Within the European Union itself, there is considerable scope for further catch-up growth among the accession countries, where GDP per head is, for example, 79% of the EU average in the Czech Republic, 66% in Poland and 47% in Bulgaria. Over the ten years to 2012, these three economies grew by annual averages of 2.9%, 4.3% and 3.4% respectively, despite the impact of the financial and Eurozone crises.[37] Currently, the UK takes little advantage of new trading opportunities with the 13 countries that joined the EU between 2004 and 2013 –together they accounted for only a 3.1% share of exports[38], highlighting the continuing opportunities in developed markets for UK firms.

Exhibit 7: Continued opportunities for UK firms in developed markets

Kingfisher: While EU demand as a whole has suffered from the economic crisis, new markets within the EU are showing great promise. Eastern enlargement of the EU has opened up new opportunities for UK companies through the expansion of the Single Market. For example, Romania’s DIY market has trebled in size since 2005 to around bn (2011), and Kingfisher PLC, who own B&Q and Screwfix, expanded into Romania in 2013, acquiring 15 large stores.

Omniverse Vision: This SME with six employees provides alternative content in more 4,000 cinemas in over 50 countries, with its biggest markets in Europe, the US and South America.

45 %

The EU28 and US economies together account for 45% of global GDP

The fact that Europe and the United States are at a broadly similar level of income and development to the UK also means that they are likely to remain major trading partners for the foreseeable future, even as the BRICs, together with Indonesia and Mexico, surpass today’s G7 in terms of overall economic size. This is because, as well as specialising in areas of comparative advantage, economies of scale drive countries to specialise in exporting goods and services that are similar to those being demanded by their own consumers. This ‘home market effect’ has been invoked to explain the fact that the bulk of trade between developed countries (which continues to outweigh their trade with emerging economies) is in varieties of goods from the same industry (so-called ‘intra-industry trade’).[39]

USA whitehouse america

UN merchandise trade complimentary data, shown in Exhibit 9, confirm that the UK’s current mix of exports is, indeed, closely matched to the import demands of other developed economies. The index measures the extent to which the sectoral mix of the UK’s goods exports match the import demands of other countries. All of the ten countries with import demands most closely matched to Britain’s exports are high-income economies – seven are in Europe, and the United States comes in ninth. These rankings are, of course, likely to change in the coming years as the UK’s export mix shifts to take advantage of new global opportunities, but the home market effect suggests that a bias towards high-income markets is likely to remain for a considerable period.

The UK needs to maximise its export offering to both new and existing export partners in order to drive the recovery.

Exhibit 8: Britain's export mix is suited to the demands of rich economies

Trade Partner UK’s Export Complementarity Ranking (1=partner most suited to UK export mix)
Belgium 71% 1
Australia 69% 2
Germany 68% 3
Canada 68% 4
France 67% 5
Sweden 66% 6
Switzerland 66% 7
Finland 65% 8
United States 64% 9
Spain 64% 10
Brazil 64% 11
Russia 58% 30
China 48% 101
India 45% 135

Source: UN Comtrade

Economic fundamentals will continue to make regional trade with Europe particularly important

In addition to the predisposition of advanced economies to trade with each other, structural economic fundamentals make regional trade particularly important. It would be difficult, if not impossible, for Britain to achieve the same degree of collaboration and integration that it has today with European trade partners with more distant trading partners for a number of reasons:

Transport costs drive trade closer to home

By raising the cost of trade in proportion to geographic distance, transport costs drive trade closer to home, particularly in the cases of heavy goods and perishables such as food. Transport costs have remained a significant factor even following technological advances such as the development of shipping containers and, in recent years, the growth of express delivery service (EDS) companies. For example, in the UK's food & drink sector, 9 of the top 10 export markets are in the EU, with exports to Ireland, France, the Netherland and Germany accounting for half of the UK's exports.[40] A study of 1,467 estimates of the impact of distance on trade found that it has been stable over the last fifty years, despite changes in globalisation and transportation technology and, if anything, has strengthened slightly.[41]

There are lower barriers to entry for new exporters looking to trade with regional neighbours

Firms that are new to exporting generally find it easier to break into markets with greater cultural and legal similarities. Evidence suggests that most successful new UK exporters gain a foothold in the likes of the EU or the US before moving to more distant, less developed or institutionally unreliable countries.[42]

For example, a respondent to the CBI’s membership survey on the European Union told us: “My organisation is small and constantly developing new products...It is the EU markets which form a solid well-regulated trade base which enables us to then move on to the risky markets outside of the EU.”

Integrated supply chains are concentrated in regions

Cross-border supply chains, which are an increasingly important aspect of globalisation and productivity growth (an issue explored in more detail in Chapter 2), appear to be particularly regionalised and sensitive to geographic distance. A recent OECD study, for example, found that a 10% difference in distance between two countries decreases intermediate goods imports by 8.2% as compared to 7% for consumption and 5.3% for imports of capital goods.[43] A number of factors help explain the sensitivity of intermediates to distance and transport costs, although at present there is insufficient evidence to determine which ones are more important. First, intermediate inputs may be less differentiated than final goods, not being directly subject to consumer preferences, and therefore may be more price-sensitive. Secondly, geographic distance introduces greater risks to ‘just-in-time’ and other highly efficient production processes. Finally, face-to-face interactions and cultural similarities may be of greater importance when building and managing complex value chains.[44]

For the UK, 40 years in a customs union with other European countries and a quarter of a century in a Single Market has meant that the UK and EU economies are greatly integrated. This goes beyond the headline statistics about shares of exports and imports. The UK is a major participant in European supply chains (See Exhibit 9), with around half of its imports from the EU consisting of intermediates that go on to be imbedded in British products that are variously consumed at home or re-exported.

9/10

Nine out of ten of the UK's top export markets for the food and drink sector are in the EU

This is part of a wider trend. As Exhibit 11[45] shows, already around 17% of the value of UK exports is comprised of imports from other countries – a trend that is growing in importance globally. For UK companies either at the top of or operating as part of supply chains, international co-operation is a vital part of their competitiveness, with final products today made up of parts from around the world.

11 Percentage of total value-added originating abroad in UK exports

Exhibit 10: Percentage of total value-added originating abroad in UK exports

Economic fundamentals suggest, therefore, that Europe is likely to play an important part in Britain’s economic future whether it is a member of the EU or not.

17 %

Percentage of the value of UK exports comprised of imports from other countries

Exhibit 9: UK participation in – and reliance on – European supply chains

Dewhurst: An independent supplier of components for lifts and doors – selling to all the major lift manufacturers, including ThyssenKrupp, Kone and Schindler, in Europe. The company was founded in 1919 and the Dewhurst Group now has sales of approximately £40 million and employs over 300 people in locations around the world, supplying products from its manufacturing plant in West London.

Ford: Ford’s Dagenham plant supplies over 50% of global Ford diesel engine demand. Together with their Bridgend petrol engine production facility, Ford’s annual UK production capacity is over two million engines –  more than 85% of which are exported, primarily to the EU. The plant produces engines for Ford and a number of other automotive manufacturers. Ford is investing £1.5 billion across its UK sites for low CO2 design, development and manufacturing.

1.5. In response to shifts in global economic weight, the UK does not face an either–or choice between Europe & the US and emerging markets

As a confident nation with a broad range of entrepreneurial businesses, Britain stands to benefit from the great opportunities offered by this surge in world growth if it makes the right choices. Today, however, Britain’s trade and investment links are still heavily tilted towards other rich developed nations, principally the United States and members of the western European Union. Exports to the emerging world are growing rapidly, but they are doing so from a very low base. While the growing spending power of developing economies’ middle classes is likely to play to Britain’s trading strengths, progress is likely to be slow, and British firms face considerable practical barriers when breaking into emerging markets.

Moreover, it is unlikely that the UK will totally shift away from the trading and investment partners of today, since there are compelling economic fundamentals that make trade between advanced economies and especially between those clustered in a region particularly important.

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Britain does not face an ‘either/or’ choice. It needs to both maximise trade with existing large markets at the same time as building links to new markets.

This means that Britain does not face an ’either/or‘ choice. It needs to maximise trade with existing large markets at the same time as building links to new markets. This approach is not simply rooted in an economics textbook – it is one being adopted by UK businesses as they set out their strategies for growth over the coming years. Firms are choosing this ’and‘ strategy to maximise growth from as many sources as possible, and the UK as a whole should follow suit.

The focus must be on building links to markets all over the world by breaking down barriers between economies, participating in the exchange of people and ideas, and finding the common ground on regulation and global co-operation that can help harness the global trends reshaping the world economy to bring prosperity to the UK and its citizens.


References

[1] In purchasing power parity terms. IMF World Economic Outlook, April 2013.

[2] McKinsey Global Institute (MGI). Note that the OECD includes a handful of emerging economies including Mexico and Turkey.

[3] In purchasing power parity terms. IMF World Economic Outlook, April 2013.

[4] In nominal terms. PwC, ‘World in 2050 – The BRICs and Beyond: Prospects, Challenges and Opportunities’, January 2013.

[5] IMF World Economic Outlook, April 2013 and UN Population Database. GDP share of half is in purchasing power parity terms. Emerging & developed markets’ share rose from 37% to 50% between 1997 and 2012 while emerging Asia’s share rose from 14% to 25%.

[6] OECD Development Centre. Middle class defined as daily consumption expenditures between and 0 per person in purchasing parity terms.

[7] MGI analysis; UN population database.

[8] MGI Cityscope 1.1. China region includes Hong Kong, Macau and Taiwan.

[9] McKinsey Global Growth Model, November 2012

[10] Prakash Kannan, Alasdair Scott & Marco E. Terrones, ‘From Recession to Recovery: How Soon and How Strong?’, 2009

[11] MGI, ‘Debt and Deleveraging’, January 2010

[12] UN population database; MGI analysis

[13] United Nations Population Division

[14] Standard & Poor’s; IMF Fiscal Monitor, May 2010; MGI analysis

[15] IMF World Economic Outlook, April 2013

[16] ONS Pink Book 2013

[17] ONS Pink Book 2013

[18] OECD Stat

[19] Eurostat: EU27 trade since 1988 by SITC

[20] IMF World Economic Outlook, April 2013

[21] ONS Pink Book 2013

[22] IMF World Economic Outlook, April 2013

[23] CIA World Factbook

[24] MGI Cityscope 1.1

[25] OECD Development Centre

[26] FCO Econmics Union, UK Exports to China: Now and in the future, January 2013

[27] Foreign and Commonwealth Office, British Embassy in Beijing, China in Numbers, October 2013

[28] Foreign and Commonwealth Office, British Embassy in Beijing, China in Numbers, October 2013

[29] IMF World Economic Outlook, April 2013

[30] ONS Pink Book 2013

[31] MGI

[32] IMF World Economic Outlook, April 2013

[33] Euromonitor International, ‘India’s Rapid Unplanned Urbanisation Creates Opportunities and Challenges’, 2013

[34] UK Trade & Investment, Inward Investment Report 2012/13, July 2013

[35] ONS Pink Book 2013. Following the IMF, non-EU developed countries are Australia, EFTA, Hong Kong, Iceland, Israel, South Korea, New Zealand, Singapore and Taiwan.

[36] IMF World Economic Outlook, April 2013

[37] In constant prices. IMF World Economic Outlook, April 2013

[38] ONS Pink Book 2013

[39] The home-market effect is a key element of the new trade theory that came to prominence from the early 1980s onwards with the contributions of leading economists such as Paul Krugman. See Peter Neary, ‘Putting the "New" into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics’, 2009

[40] Food and Drink Federation, ‘Top Export Markets’, 2012

[41] Anne-Célia Disdier & Keith Head, ‘The Puzzling Persistence of the Distance Effect on Bilateral Trade’, 2008

[42] BIS, ‘UK trade performance across markets and sectors,’ 2012.

[43] S. Miroudot, R. Lanz & A. Ragoussis, ‘Trade in Intermediate Goods and Services’, 2009

[44] R. Baldwin ‘WTO 2.0: Global governance of supply-chain trade’, 2012

[45] World Input–Output Database

[46] IMF World Economic Outlook, April 2013

[47] ONS Pink Book 2013

[48] ONS Pink Book 2013

[49] ONS Pink Book 2013

[50] CBI, ‘Sterling Assets V: British Investment Creating US Jobs’, 2013

[51] Centre for Economic Policy Research, Estimating the Economic Impact on the UK of a Transatlantic Trade and Investment Partnership (TTIP) Agreement between the European Union and the United States, March 2013, available at:

[52] EU and EFTA, IMF WEO April 2013

[53] EU and EFTA, 2013 Pink Book

[54] ONS Pink Book 2013

[55] In order: Germany,