Two cartoons to illustrate two key issues: Britain doesn't export enough (especially goods) and so has a large current account deficit.
That's not to say that the UK doesn't have significant exports markets - but where?
I found this Economist video quite helpful - it shows where multinational companies (MNCs or TNCs) make the bulk of their sales. It certainly shows how surprisingly international British, French and German firms are relative to the giants of the US and Japan (which have larger domestic markets).
This graph makes clear the size and nature of our current account deficit - which is made up of a huge deficit in goods, offset to some extent by a surplus on services. You can read more from this article which explains that our goods exports include machines, pharmaceuticals and cars. When added to the next biggest—oil—these account for half of Britain’s exports. But Britain still buys more than it sells. In 2012 car exports were worth £21 billion, with Land Rovers and Minis strong sellers, though cars worth £23 billion were bought from abroad. And while £40 billion of oil went overseas, £54 billion came in as imports. In total, the deficit ran to £106 billion in 2012.
Worries about persistent trade shortfalls are offset a little by services surpluses. Banking, law firms, IT and other consultancies are selling well in non-EU countries. And because these countries are growing fastest, the services surplus is getting bigger. This means that Britain’s EU trade is being nudged further down the list.
For several years(and for fairly obvious reasons) many commentators have suggested that the UK should orientate itself away from Europe and focus attention on growth markets elsewhere in the world. It's proving terribly difficult to achieve that. Even the huge drop in the value of the pound in recent years hasn't helped.
Helpfully, all this is explained in a terrific Economist video that picks up the depressingly familiar discussion. You'll find it in this article, in which the authors make the case that the lack of medium sized firms in the UK economy hampers exports. They also make the interesting observation that between 1997 and 2007 Britain boomed, with much of the froth in the public sector and construction. New government jobs were created, and consultancies sprang up to bid for public contracts. Capital and labour were sucked in by the construction boom. Unlike a manufacturing firm, which can sell its products at home and abroad, much of Britain’s boom was specific to the domestic economy. It will take time for the country’s productive resources to be reallocated.
The article and video also help to explain the concept of income and transfers in the current account.
Unfortunately, time isn't on our side, and the UK urgently needs more exports to 'rebalance' the economy and to create a stable platform for growth.
What does the UK export?