Global crisis cuts value of Kenya’s exports to the UK

The value of Kenya’s exports to the United Kingdom slowed down over the second quarter of the year on the effects of the global economic downturn that saw consumer demand heavily weakened, new data shows.

Statistics released on Wednesday by the British High Commission in Nairobi revealed a gradual decline of Kenya’s shipments to the European country between March and June — a trend attributed to falling demand in the UK economy where fixed investment fell by around 17 per cent between the first quarter of 2008 and the second quarter of 2009, and private consumption contracted by close to four per cent over the same period.

According to the data, Kenya’s exports to the UK in June was valued at Sh2.8 billion compared to Sh3.6 billion in January.

The performance over the six-month period to June was however better than that registered over the same period of 2008, having grown by 5.88 per cent.

The release of the performance data coincided with a visit to Kenya by a delegation from the Birmingham Chamber of Commerce and Industry (BCCI), which is seeking to identify new trade and investment opportunities.

The UK is among markets that Kenya depends on for bulk export of its crops including horticulture, tea and coffee.

For instance, over the first nine months of this year the UK market lent strong support for Kenyan tea exporters taking up 47 million kilogrammes of the commodity.

The UK market also supports Kenya’s horticulture, which raked in Sh73 billion in 2008. Statistics by the Kenya Flower Council (KFC) showed that the UK alone accounted for 23 per cent of total floriculture exports to the EU.

The bloc takes up 35 per cent of flowers shipped out from Kenya.

And in what is likely to dampen the spirit of local exporters eyeing the UK and the wider EU market, the economic forecast by the European Commission revealed a bleak outlook despite recent signs of economic recovery.

“Looking ahead, domestic demand is not expected to improve in 2010, although it is likely to do so in 2011, albeit modestly,” the report says in a summary of prospects of the UK economy.

It pointed out that the UK’s outlook for private consumption, which accounts for around 60 per cent of domestic demand, is marked by weak household income throughout most of the forecast period.

“This will be compounded by weaker earnings growth, as inflation moderates and rising unemployment keeps wage pressures in check.

Transfer payments

“On the other hand, higher transfer payments to households will temper the labour market’s negative impact on gross disposable income in 2010, as was already the case throughout 2008 and the first half of 2009,” the commission says.

Nonetheless, the EC says there could be a glimmer of hope as employment is expected to rise in the UK in 2011 and earnings growth to recover. “Somewhat, disposable income would then rise again in both nominal and real terms.

Household spending growth will be tempered by a number of factors over the forecast period, notably households’ desire to increase savings in response to a higher risk of unemployment and the sizeable falls in households’ net wealth brought about by sharp asset price falls since the onset of the crisis,” the forecast says.