Share of goods in UK exports falls to record low

The share of goods in total UK exports has fallen to a record low after drops in their value over the past two years, in a sign of Britain’s shift towards services as the economy absorbs the impact of Brexit and oil price moves.

Goods made up 40.8 per cent of total UK exports in the year to May, down from about two-thirds in 2000 and the lowest-ever figure, according to a Financial Times analysis of data from the Office for National Statistics.

In the same period, the value of goods exports fell by an annual rate of 5.4 per cent, extending a trend that began in 2023.

By contrast, services exports hit a record 59.2 per cent of total UK exports and their value surged by 7.3 per cent in the 12 months to May, marking an acceleration of the sector’s long-term growth in prominence.

“Brexit is the main cause of the country’s manufacturing malaise,” said John Springford, deputy director of the Centre for European Reform think-tank. “Services exports have performed much better because global demand for traded services has been rising, playing to Britain’s strengths.”

The decline in UK goods exports was “troubling” compared with other advanced economies, he said, noting that, adjusted for inflation, they were down sharply on 2019 levels, before the Covid-19 pandemic.

Despite strong growth in services, UK real-terms trade volumes rose by just 1 per cent between 2019 and 2024, compared with growth of 8 per cent in both the G7 and EU27, according to the CER.

Stripping out prices, goods exports have been especially poor: their volumes plunged to the lowest in 15 years in the year to April and remained around that level in the year to May, ONS data shows.

Prime Minister Sir Keir Starmer in June set out a new trade strategy focused on boosting services exports, in a bid to tackle Britain’s dismal trade performance over the past decade and grow the economy.

Pointing to the wider economic implications of trade, Springford said “weak” export performance had “constrained growth, curbed tax revenues, and contributes to high government borrowing costs”.

In the wake of Russia’s full-scale invasion of Ukraine in February 2022, falls in the price of oil hit the value of UK oil exports.

But the value of goods exports excluding oil were also down in the 12 months to May compared with the same period a year earlier, with cars, chemicals and machinery among the sectors reporting declines.

Thomas Sampson, associate professor of international trade at the London School of Economics, said that while Brexit “may bear some responsibility” for the decline in goods exports and strength of services exports, it could also reflect “simply a continuation of the long-run transformation of the UK economy away from manufacturing and into services”.

The shift could have been accelerated by energy price rises after the Ukraine war and reductions in the cost of exporting services helped by more remote working since Covid, he added.

The value of goods and services exports rebounded between 2021 and mid-2023, boosted by a combination of pent-up demand and less supply chain disruption when the economy reopened after the pandemic.

The rebound was also helped by the UK becoming a crucial transit point for liquefied natural gas and other gas imports into Europe after Russia invaded Ukraine, and the impact of long-running high inflation.

But the trend in values for the two main segments of the economy — services account for 80 per cent of UK GDP — has diverged in the past two years.

In the 12 months to May, the value of car exports fell at an annual rate of 10 per cent, with declines of 9 per cent and 4 per cent, respectively, for mechanical machinery and chemicals.

A 32 per cent plunge in the value of crude oil exports dragged the overall figure lower in the year to the end of May 2025, according to ONS data that was analysed by the Department for Business and Trade on July 18.

In contrast, in the year to March, the value of financial services rose 13 per cent, while other business services, including management consulting and research and development, rose by 5 per cent.

The DBT analysis also showed a drop over the past decade in the share of UK total exports to the EU, down from 44.5 per cent in 2014 to 41 per cent in the year to March.

The ONS in March delayed the release of trade data after it identified an error dating back to 2023, but publication has now resumed. In its monthly updates, the agency has also a warned of a “structural break” in figures on UK-EU trade, following changes to data collection since Brexit.

In its most recent outlook in March, the Office for Budget Responsibility said it expected “continued weak growth in trade volumes over the coming years”.

This in part reflected “the continuing impact of Brexit, which we expect to reduce the overall trade intensity of the UK economy by 15 per cent in the long term”, the fiscal watchdog added.

Stronger services exports have widened the UK’s services trade surplus, while the goods trade deficit has deepened.

In the 12 months to May, the UK had a trade in goods deficit of £239.4bn, up from £206.9bn the year before, according to official data. In the same period, the surplus in trade in services rose from £183.7bn to £193.9bn.

UK exports to the EU in services that have faced trade barriers since Brexit have declined by 16 per cent relative to other bilateral trade flows, according to recent research by LSE economists Shania Bhalotia, Swati Dhingra and Danyal Arnold.

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Starmer — who last week finalised a trade accord with India — signed a “reset” deal with the EU in May aimed at easing trade barriers and deepening ties, although some industry groups have called on him to go further.

William Bain, head of trade policy at the British Chambers of Commerce, said there had been “significant volatility in trade policy and geopolitics” over the past year but that services had achieved “sustained growth”.

“Removing non-tariff barriers and staying competitive on tariffs will help the UK maintain goods exports through 2025 and beyond,” he added.

The Department for Business and Trade said: “We recognise that, while services exports are at a record high, there is more we can do to boost goods exports.

“Our trade strategy will slash barriers to trade helping UK firms sell more products in new markets around the world.”