Britain’s decline as an imperial power and our closer links with Europe, have brought about a marked shift in the pattern of trade in the past fifty years.

Other EU countries now account for 56% of total UK exports (of goods and services) and supply 52% of our imports.

Of the UK’s ten largest trading partners, seven are EU member countries, the remainder being the USA, China, and Japan.

It would seem that the shift towards Europe has now stabilised, which partly reflects the generally lacklustre rate of economic growth that has prevailed in the EU in recent year.

Since the start of 2004, however, the EU has expanded rapidly, notably through the admission of former Soviet bloc countries in eastern Europe.

Eight east European countries (sometimes called the ‘A-8’) joined the EU in May 2004, together with Cyprus and Malta; these were followed by Bulgaria and Romania, who joined at the start of 2007. The number of member countries has therefore risen from fifteen to twenty-seven within the space of three years.

The reclassification of those countries as EU members may over time increase the relative importance of the EU bloc as a trading partner for the UK.

These countries are generally faster-growing economies than the ‘old’ EU-15 members (albeit that many of them are starting from a much lower level in terms of economic output and material living standards).

Exports to Poland, for instance, overtook sales to Portugal in 2005 and by 2008 were a third higher. Between 2001 and 2008, the value of Britain’s exports to the twelve new member states increased by 107%, expanding their share of the UK world total from 1.7% to 2.1%.

It is reasonable to expect further strong growth in coming years as those countries catch up in terms of economic development: But, given the current small size of the new members’ economies, this will not happen overnight: despite the strong growth of recent years, combined sales to the twelve new members in 2008 were still less than exports to Belgium..

The US is especially important as a market for British services, accounting for 22% of earnings, and generating a healthy surplus of about £16.5 billion in 2008.

It is also an important trading partner for goods, although the USA’s share of the total UK goods trade has declined from a peak of 14% in 2000 to just over 10% in 2008.

More significantly, the goods balance with the USA has improved markedly over the past decade, moving from persistent deficits in the late 1990s to record surpluses of £5 billion or more in each year from 2003 and rising to £9.5 billion in 2008.

It is clear that the UK’s trading relationships are very concentrated, the ten leading partners accounting for two thirds of total goods trade.

Three of these countries, the USA, Germany and Netherlands, together account for 30% of all flows into and out of the UK.

In 2008, Britain exported goods and services to the US worth over £100 billion, but we trade much smaller amounts with many other countries, including even those with historic links to the UK. Total exports to New Zealand in 2008, for instance, were just £1.5 billion.

Eight countries appear on the lists of both the top ten export markets and top ten import suppliers. The exceptions are Sweden and Switzerland (export markets), and China and Japan (import sources).

TABLE 17.2: UK MAJOR TRADING PARTNERS (GOODS), 2008