12 Mar 2020
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National statistics, such as GDP and exports and imports, are commonly referred to as the economy’s ‘vital signs’. These economic figures are at the centre of the public’s understanding of how the country is faring and give a snapshot of the economy’s health. The Office of National Statistics (ONS) recently published data on UK exports for 2019. The headline read: ‘UK exports at an all-time high, with goods exports to non-EU countries growing by 13.6% on 2018’.
The UK has always imported more than it’s exported and steep growth of this kind would represent a surplus for the UK for the very first time in modern history. At face value, this astonishing headline would seem like incredible news and a huge leap forward for the UK. So, what’s behind it? Did we invent a brand-new, innovative product that the rest of the world is desperate for or have we discovered the secret to manufacturing cars cheaper than the rest of the world?
Disappointingly, investigations have shown that it’s nothing more than an illusion. The huge increase in UK exports appears to have been skewed by one exceptional movement of gold. London is a centre for gold trading and represents around 70% of world trade in gold. The ONS data on UK exports of precious metals shows a stationary average until 2019, when it skyrockets. Compared with the three previous months, December 2019 recorded an increase in exports of just under 1000%. This uplift represents an approximate increase of £13 billion, which equates to the GDP figures of a country the size of Latvia!
Ed Conway, Sky News reporter, has done some investigation into the movement of gold that has caused the headlines and it appears that a US bank with a vault in London has moved a large amount of gold from unallocated to allocated. This reallocation means that it appears as an export from the UK to the US. The gold has in fact stayed in the very same spot, all that has changed is a number on a spreadsheet. The gold market isn’t transparent and we can’t know for sure that this is the sole cause of the increase in exports from the UK, but the evidence would suggest that it has played a significant part.
Another astonishing report in September 2014 declared that the size of the UK economy had grown by around £65 billion! A seemingly great leap for the UK but this time the spike appeared to be down to a change in EU accounting rules, where trade from illegal drugs and prostitution were included in the GDP figures. Replotted to 2009, the ONS said that drugs and prostitution would add a staggering £10 billion to the UK economy with £5.3bn derived from prostitution and £4.4bn from illegal drugs.
Sometimes results and statistics are not what they seem. Sadly, the UK has not suddenly become a top exporter, nor is it 5% richer. Digging deeper can reveal the facts and the truth often lies in the movement of numbers on a spreadsheet. Research and investigation can have significant value in the face of smoke and mirrors.
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This information is for UK Professional Advisers only and should not be given to retail clients.The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
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