Why don’t high exports always lead to economic success?

Some exports, being exported. Image: Getty.

While trade and exports are usually talked about in the national context only, the reality is that the UK’s exports are sent from places up and down the country. But as the Centre for Cities’ recent Cities Outlook 2017 report shows, some places are much more successful at exporting than others – and this has big implications for the UK’s productivity gap and the government’s industrial strategy.

In total, cities accounted for 62 per cent of Britain’s total exports in 2014. The dominance of cities was particularly marked for services: they accounted for 51 per cent of goods exports, but 74 per cent of services exports.

Of course, there was much variation between them. Sunderland was Britain’s top exporting city, sending £40,650 of goods and services overseas for every job in the city. This is one third higher than second-placed Worthing (£29,640) and 11 times higher than bottom-placed York.

Curiously though, the varying export performance of cities doesn’t necessarily go hand-in-hand with its wider economic performance. Comparing exports with productivity at the city level shows only a weak relationship between the two: Sunderland in particular stands out for having relatively low productivity despite its strong export performance.

Splitting exports out into goods and services offers a clue as to why this might be the case (see the charts below). While there is a reasonable positive correlation between services exports per job and productivity, there is no relationship between goods exports per job and output per worker.

This may be a result of where the “value-add” of an export takes place: the disaggregated nature of manufacturing means that design and engineering don’t necessarily take place in the same place as assembly. For example, in Nissan’s case, its Qashqai model was designed in Paddington, engineered in Cranfield but built in Sunderland. So while the sale of the car is allocated to Sunderland, little of the higher value input to the product takes place there.

Increasing trade and exports was one of the ten pillars that the government set out in its recent Industrial Strategy green paper. What this data shows is that boosting exports won’t necessarily improve productivity across the country: what’s important is the type of exporting activity. As the example of Nissan suggests, it is knowledge-intensive exporting activity in particular which will have the biggest impact in driving up productivity – both in terms of firms that export services and those in advanced manufacturing.

And this has implications for the approaches taken to improve exports across the country. The standard approach, and the one emphasised again in the government’s green paper, is to focus on export credit schemes and trade missions. Such schemes will no doubt have a positive impact in the cities that already have a number of exporting businesses (such as those cities in quadrant A in the chart above). But it will do very little for the worryingly large number of cities – 37 out of 62 – that are in Quadrant C.  Their poor exporting and productivity performance suggests that it is their lack of exporting businesses full stop, rather than any reluctance of their businesses to export, that is the problem.


This means that, as any industrial strategy that is place-based needs to do by definition, a very different approach will be needed in these places to both boost productivity and exports.

The number one objective will be to improve skills. Knowledge-based businesses, be they in manufacturing or services, require high-skilled workers. But those cities in Quadrants B and C tend to have fewer degree-educated people living in their cities and higher shares of people with no formal qualifications relative to their more successful counterparts.

To do this will require prioritising both improving performance within schools and an improvement of the skills of the existing workforce, with a particular focus on numeracy and literacy in both cases. This should be a key priority for both local and national leaders, particularly in the Industrial Strategy, if they are to succeed in extending job opportunities and increasing wages for people in cities across the country.

Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

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Here’s how Henry Ford and IKEA could provide the key to solving the housing crisis

A flatpack house designed by architectural firm Rogers Stirk Harbour and Partners, on display at the Royal Academy, London, in 2013. Image: Getty.

For many people, the housing market is not a welcoming place. The rungs of the property ladder seem to get further and further out of reach. There are loud calls to build hundreds of thousands of new homes (and equally loud demands that they’re not built in anyone’s back yard).

If there was ever a time to introduce mass-produced affordable housing, surely that time is now.

The benefits of mass production have been well known since Henry Ford’s car factories made the Model T back in 1908. It was only made in one colour, black, for economic reasons. Not because it was the cheapest colour of paint, but because it was the colour that dried the quickest.

This allowed the production line to operate at faster, more cost effective, speeds. And ultimately, it meant the product could be sold at a more attractive cost to the customer.

This approach, where processes are tested to achieve increasingly efficient production costs, is yet to filter properly into the construction of houses. This makes sense in a way, as not everybody wants exactly the same type of house.

Historically, affordable mass-produced housing removed a large amount of customisations, to ensure final costs were controlled. But there is another way. Builders and architects have the ability to create housing that allows a level of flexibility and customisation, yet also achieves the goal of affordability.


Back in 2006, the “BoKlok” approach to affordable housing was launched to great acclaim in the UK. Literally translated from Swedish, the term means “live smart”. Originally created from a collaboration between flat-pack favourite IKEA and Swedish construction giant Skanska, the BoKlok housing approach was to allow for selected customisation to maximise individuality and choice for the customers. But at the same time, it ensured that larger house building components were duplicated or mass-produced, to bring down the overall costs.

Standard elements – wall panels, doors, windows – were made in large numbers to bring the elemental costs down. This approach ensured the costs were controlled from the initial sketch ideas through to the final design choices offered to the customers. The kitchens and bathrooms were designed to be flexible in terms of adding additional units. Draw and cupboard fronts interchangeable. Small options that provided flexibility, but did not impact on overall affordability.

It’s a simple approach that has worked very well. More than 10,000 BoKlok houses have now been built, mainly in Norway, Sweden and Denmark, with a small number in the UK.

But it is only part of the architectural equation. The affordable housing market is vital, but the cost of making these homes more adaptable is rarely considered.

Flexibility is key. The needs of a house’s inhabitants change. Families can grow (and shrink) and require more room, so the costs of moving house reappear. One clever response to this, in BoKlok homes, has been to allow “built in” flexibility.

Loft living

This flexibility could include a loft space that already has flooring and a built in cupboard on a lower floor which can be simply dismantled and replaced with a “flat-pack style” staircase that can be purchased and installed with minimal disruption to the existing fabric.

Weeks of builders removing walls, plastering and upheaval are replaced by a trip to the IKEA store to purchase the staircase and the booking of a subcontractor to fit it. The original design accounted for this “future option” and is built into the core of the house.

The best approach to new affordable housing should consider combinations of factors that look at design, materials and processes that have yet to be widely used in the affordable housing market.

And the construction sector needs to look over its shoulder at other market places – especially the one that Henry Ford dominated over a century ago. Today’s car manufacturers offer customised options in everything from colour to wheel size, interior gadgets to different kinds of headlamp. These options have all been accounted for in the construction and costing of each model.

The ConversationThey share a similar design “platform”, and by doing so, considerably reduce the overall cost of the base model. The benefit is quicker production with the added benefit of a cost model that allows for customisation to be included. It is a method the construction sector should adopt to produce housing where quality and affordability live happily together.

David Morton, Associate Professor in Architecture and Built Environment, Northumbria University, Newcastle.

This article was originally published on The Conversation. Read the original article.