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Thu September 23 2021

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UK construction's balance of trade deficit narrows

5 Aug After years of widening, the UK’s balance of trade in construction materials has finally started to narrow.

Trade through the Port of Dover
Trade through the Port of Dover

The UK’s £9bn trade gap in construction materials is a long way off the 2025 target of £3bn but at least it is moving in the right direction.

Imports of construction materials into the UK decreased by £294m in the first quarter of 2021 compared to the previous quarter, a decrease of 6.0%.

Exports of construction materials decreased by £157m in Q1 2021 compared to the previous quarter, a decrease of 8.5%.

As a result, the quarterly trade deficit narrowed by £136m to £2,876m, a decrease of 4.5%.

The first quarter fall in the balance of trade deficit comes on the back of a 13.7% fall in 2020.

Over the whole of 2020, imports of construction materials decreased by 10.0% compared to 2019, from £18,144m to £15,880m.

In the same period exports decreased by 14.0%, from £7,723m to £6,886m.

The annual trade gap in building materials therefore reduced from £10,421m in 2019 to £8,994m in 2020.

Quarterly exports and imports of construction materials, UK
Quarterly exports and imports of construction materials, UK

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What is notable in the graph above, showing quarterly fluctations in imports and exports over the years, is the steepness of the decline in imports when the first cornovirus restrictions were introduced to the UK at the end of Q1 2020, and the more modest decline in exports at that time.

According to government statistics*, the trade deficit was historically at its smallest throughout the 1990s, with a mean of £309m over this period. This trade deficit was 24% of the value of imports. As of the first quarter of 2021, the trade deficit is £2,876m, 63% of the value of imports.

Reducing the UK’s trade deficit in construction materials by 50% was one of the four main targets  in the Construction 2025 strategy published by the government in 2013. At that time, in 2013, the UK exported £6bn-worth of building materials and components each year, and imported £12bn – a £6bn trade deficit in the sector.

Other core targets of Construction 2025 were to lower construction and whole-life costs by 33%, halving the time it takes to get projects from inception to completion, and reduce greenhouse gas emissions in the built environment by 50%. It set up the Construction Leadership Council with the specific remit of driving progress in the Construction 2025 targets.

While there has been progress in three of the target areas, the balance of trade deficit has so far proved hard to shift. However, in 2020 it fell below £9bn for the first time since 2015. That £3bn target still seems unachievable, without some rapid seismic shift in construction methods and purchasing habits that could potentially bring disbenefits in other target areas. But there seems to be some progress at last.

Top five export markets for UK construction materials in 2020

  • Republic of Ireland  £1,202m
  • Germany  £680m
  • USA  £589m
  • France  £532m
  • Netherlands  £482m

Top five import markets 2020

  • China  £2,945m
  • Germany  £2,029m
  • Italy  £971m
  • Turkey  £788m
  • Spain  £742m

*Source: Building materials and components statistics: July 2021, published by the Department for Business, Energy & Industrial Strategy

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