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Report from
the UK
UK 2022 tropical imports flat as weak second half
offsets strong start to the year
The latest data from the UK Office for National Statistics
shows that UK GDP increased 4.0% in 2022 after 7.6%
growth in 2021, as it recovered from the historic blow
from the COVID-19 pandemic. However this "rise" over
the last two years must be considered in the light of the
UK being amongst countries worst affected by the
COVID-19 pandemic which led to a 9.4% fall in GDP in
2020 at a time when there was already uncertainty due to
the country’s departure from the EU. The UK economy in
December 2022 was still smaller than it was in December
2019.
The relatively sluggish recovery of the UK economy last
year is reflected in UK imports of tropical wood and wood
furniture products which were flat overall in 2022, valued
at US$1.4 billion, the same as the previous year and just
equalling the pre-COVID level in 2019. UK import value
of tropical wood and wood furniture products last year was
only marginally above the long term average for the
previous ten years and well below levels prevailing in the
years prior to 2010 (Chart 1a).
Strong UK imports of tropical products in the first half of
last year were offset by a sharp downturn in the last six
months of the year. In 2022 there was an increase in UK
import value of tropical joinery (+9% to US$271 million),
sawnwood (+32% to US$124 million), and
mouldings/decking (+18% to US$35 million). However
UK import value of tropical wood furniture fell 8% to
US$731 million, while import value of tropical hardwood
plywood was down 12% to US$168 million.
Vietnam was the leading supplier of tropical wood and
wood furniture to the UK last year, with import value of
US$382 million, 3% down on the previous year. The value
of direct imports also declined last year from all three of
the other leading tropical suppliers including Indonesia (-
8% to US$309 million), Malaysia (-4% to US$238
million), and India (-3% to US$102 million).
However, these figures may overestimate the decline as
problems of shipping cargo directly from Asia into the UK
last year contributed to an 63% increase in the value of
tropical wood and wood furniture imports into the UK
from EU27 countries, to US$107 million.
After losing share in the UK market between 2019 and
2021 during the COVID-19 pandemic, tropical wood and
wood furniture products regained some share last year,
mainly at the expense of other lower and middle income
(LMI) countries, particularly China, Russia, and Belarus.
The total value of UK imports of wood and wood furniture
products from all countries was US$13.62 billion in 2022,
9% less than the previous year. This followed a gain of
42% in 2021.
The share of tropical products in total UK wood and wood
furniture import value increased from 10.4% in 2021 to
11.4% last year, although this is still well below the long
term average of between 13% and 14% share (Chart 1b) .
UK import value of non-tropical wood and wood furniture
products from China fell 17% to US$2.67 billion last year.
The share of China in total UK wood and wood furniture
imports fell from 24% in 2021 to 22% last year. This
represents a return to more normal levels in UK imports
from China after a 43% surge in US$ value the previous
year in response to booming demand in the immediate
aftermath of the COVID lockdowns.
Other factors contributing to slower UK imports from
China last year included supply problems during China’s
strict COVID-19 lockdowns, serious congestion at UK
ports in the first half of last year, and concerns that
Chinese products may contain Russian wood which has
been subject to trade sanctions in the UK since Russia’s
invasion of Ukraine in February last year.
UK sanctions imposed on Russian products led to an 89%
decline in the value of UK imports of Russian wood and
wood furniture last year, from US$329 million to just $36
million. Although the UK has not officially sanctioned
imports of wood from Belarus, these also fell sharply, by
90% from US$59 million to US$6 million.
Imports of non-tropical products from several other LMI
countries also fell sharply last year including Brazil (-19%
to US$151 million), South Africa (-37% to US$29
million), Ukraine (-14% to US$26 million), UAE (-56% to
US$17 million), and Uruguay (-29% to US$16 million).
Overall the share of UK imports of non-tropical products
from LMI countries other than China decreased from 6%
to 3% last year.
UK imports of non-tropical wood and wood furniture
products from the EU27 fell 1% to US$7.17 billion in
2022. This followed on from a huge 46% increase in 2021.
And because the decline from the EU27 last year was
much less than from other regions, the EU27 total share of
UK import value of wood and furniture from the EU27
increased from 53% in 2021 to 58% in 2022.
Expectations that the UK's departure from the EU might
lead to a decrease in the share of imports of wood and
wood furniture from the EU and a switch to other regions
have yet to be realised. On the contrary, in the five years
following the UK's decision to trigger Article 50 of the EU
Treaty on 29 March 2017 which began the formal process
for withdrawal from the EU, a process eventually
completed in January 2020, the share of UK wood and
wood furniture imports from the EU27 has risen by nearly
10%.
Of course recent trends in UK wood and wood furniture
imports have probably been influenced much more by the
effects of the COVID-19 pandemic than by Brexit. And
since the start of last year, trading patterns in all parts of
Europe have also been impacted by the war in Ukraine.
Therefore these short-term changes in market share may
not be a good guide to the long term effects of Brexit.
Probably the most notable feature of UK imports in recent
years has been the extraordinary level of volatility. This is
highlighted in Chart 1c which tracks UK import value of
all wood and wood furniture by major region of supply on
a monthly basis since January 2015.
The level of UK trade volatility began to increase soon
after the Brexit vote in June 2015, an event which created
considerable economic uncertainty, compounded by
regular and often confusing alterations to the timetable for
the UK’s departure from the EU, and the lack of clarity on
the trade deal with the EU that would eventually result.
And then just a few weeks after the UK officially left the
EU on 31 January 2020 - with a “harder” Brexit deal than
many expected - the COVID pandemic struck leading to a
very sharp dip in trade during the first lockdown. But this
was followed by a massive and unexpected rebound in
trade, initially as money was poured into home renovation
projects, and then as government stimulus measures, much
focused on the construction sector, began to kick in. These
measures helped maintain a buoyant level of trade until the
middle of last year.
The combination of COVID and Brexit meant that
problems of shipping and transport logistics were
particularly severe in the UK between 2020 and 2022. The
problems of shipping into the UK led to more calls for
distributors and manufacturers to shift away from their
existing "just-in-time" business model to a "just-in-case"
model of bringing more manufacturing closer to home and
increasing inventories once again.
In practice, this implied a continuing high level of
dependence on the large suppliers in continental Europe
for which turnaround times, while much longer than
before the UK left the EU single market, still compared
favourably to imports from other parts of the world.
Demand and trade will be subdued during 2023
What happens next is uncertain. However, the current
economic situation in the UK implies that overall demand,
and the level of trade, will be subdued during 2023. In
early February, the Bank of England forecast that the UK
would enter a shallow but lengthy recession, starting in the
first quarter of this year and lasting five quarters.
UK business groups have said that future investment will
be deterred by a steep increase in taxation on profits that
takes effect in April. Retailers are reported to be cutting
inventory levels due to reduced consumer demand.
Inflation remains high and interest rates are being raised,
increasing the costs of borrowing.
Despite Brexit, EU-based wood suppliers seem certain to
maintain their dominance in the UK market for many
years to come, not least due to their proximity and that
they are particularly well placed to supply the commodity
softwoods and mass-produced furniture on which the UK
relies.
But, equally, opportunities for non-EU wood product
suppliers, including in the tropics, should improve around
the margins of the UK market with the recent dramatic fall
in global freight rates and as the logistical problems that
built up during the pandemic have now eased
considerably.
One indicator is the Drewry global freight rate index
which at US$1,997 per 40-foot container in January was
81% below the peak of US$10,377 reached in September
2021 and was 26% lower than the 10-year average of
US$2,693, indicating a return to more normal prices.
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