Britain faces new and emerging trade exposures – from high-earning service sector jobs to cheap food in supermarkets – according to new research published today by the Resolution Foundation Think Tank
Britain’s traditional trade exposure – domestic manufacturing jobs under threat from cheaper imports from countries like China – has receded in recent decades, as the share of manufacturing jobs in the economy has halved from 18 to 9 per cent between 2000 and 2022.
However, this has not reduced UK workers’ overall exposure to trade, as might be expected. That’s because while manufacturing has declined, the share of trade across the economy as a whole has increased from 53 to 65 per cent of GDP between 2000 and 2023.
This rise in trade openness means that jobs across industries are now more trade intensive and exposed to shocks. In fact, the UK’s shift towards tradeable professional services such as accountancy and banking – key areas of Britain’s comparative advantage, which are concentrated in cities – mean that these high paid workers are now 18 per cent more exposed to trade today than they were in the early 2000s.
The reporr adds that the nature of workers’ exposure to trade has shifted from imports to exports, with the number of sectors that are highly exposed to exporting expanding from 16 to 23 industries between 2000 and 2019.
As a result, three quarters of the overall increase in trade exposure among high-paid workers can be attributed to higher export exposure. The risk Britain faces today is less about domestic goods being replaced by cheaper overseas alternatives, and more about falling foreign demand for the services we sell overseas, says the author.
And while high earners are more exposed to trade shocks through their jobs, the report finds that low-income families are particularly exposed to trade shocks through what they consume. This emerging trade exposure has been driven by the rising share of goods and services that we consume from abroad, from 26 to 32 per cent between 2005 and 2019.
The rising level of imports that British families consume has been a boost to living standards – offering more choice and, in many cases, cheaper products. The average price of heavily imported goods has increased by around 44 per cent over the past two decades, far less than the 65 per cent increase among goods that are less trade intensive. In fact, the price of cheap clothes – which are heavily imported – has not risen at all in real terms since 2002.
However, many of these import-intensive goods, notably energy and food (especially low-cost items), are subject to considerable price volatility.
With 12 per cent of poorer families’ (non-housing) spending going on these imported essentials, compared to just 8 per cent of richer households, they are more exposed to trade shocks as consumers than richer families.
Finally, the Foundation says that the changing nature of Britain’s trade exposure – both in terms of the jobs we do, and what we consume – means the UK faces different threats compared to recent decades, and that policy makers need to update their thinking about trade.
Sophie Hale, Principal Economist at the Resolution Foundation, said:
“Globalisation is often said to pose a threat to our living standards, as jobs and industries lose out to cheaper alternatives overseas. But while threat has receded in recent decades, Britain faces new and emerging exposures to trade.
“As we have become a more open and services-based economy, it is accountants and bankers rather than factory workers whose jobs are most exposed. We need to worry less about foreign factories replacing our own, and more about foreign firms no longer wanting our services.
“Our biggest exposure to trade is in our supermarkets, where more imports has meant greater choice and lower prices. But a large share of the essentials that poorer households buy, like energy and cheaper food items, are import-intensive and subject volatile. The past two years has taught us how exposed we are when global trade shocks affect these items.”
