John Lucas, trade policy adviser at the British Chambers of Commerce, ponders what the UK can learn from Germany’s exporting success.

John Lucas, trade policy adviser at the British Chambers of Commerce, ponders what the UK can learn from Germany’s exporting success.

The first thing to say is that we’re never going to be quite like Germany. In most developed countries, such as the UK, France and the US, manufacturing makes up 12 or 13 per cent of the economy. In Germany it’s 25 per cent. We’ll never reach that level, but we do need to manufacture more and export more of what we produce.

Economic conditions are beginning to work in our favour. The strong value of the pound over the past decade has slipped around 25 per cent in the last two years. That didn’t immediately feed into a rise in UK exports, but we believe this has started. Up to now, manufacturers have been using the extra money made from sterling’s weakness not to lower prices, but to improve their balance sheets; but there is some evidence that they are starting to cut prices for exports.

That said, the government must do all it can to support and bolster manufacturing: for example, by encouraging companies to invest in new plant and machinery through capital allowances, and having a tax system than stimulates research and development (R&D). We spend proportionately less on R&D than Germany, or indeed Japan or France: our spending is one percentage point lower as a share of GDP, which is actually very significant and shows we are not thinking about the products of the future.

Another lesson from the Germans is in targeting emerging markets. The UK has a £22 billion trade deficit with China; Germany has a £4 billion surplus. That means the Germans have been more effective than us in cracking high-growth, high-value developing markets.

Europe is our main market, but it is stagnating. China is still showing high levels of growth; and it’s not just China, but India, Brazil and Russia that we have to target if we want to maintain our position as the world’s seventh largest manufacturer.