Home Business News UK hit the hardest as global trade activity falls 14.8% in Q2

UK hit the hardest as global trade activity falls 14.8% in Q2

by LLB staff reporter
15th Jul 20 1:21 pm

Global trade fell 14.8% in the second quarter of 2020 according to the latest data from Tradeshift. But evidence of an upward curve in June suggests the impact of the COVID-19 pandemic could bottom out at the lower end of the 13-32% range predicted by the World Trade Organisation.

Tradeshift’s Global Index of Trade Health, the full findings of which are published today, uses analysis of business-to-business transaction data to present a week-by-week picture of trade activity across global supply chains. Over 1.5 million buyers and suppliers use Tradeshift to place orders and process invoices, and over $500bn in transactions cross its business commerce platform each year.

According to the report, the UK experienced the biggest drop in trade among western economies during Q2, with transaction volumes falling by 23.1%. Transaction volumes across the Eurozone fell by 21.9%, while activity in the US was down 16.1%.

China, which experienced the most significant impact on trade in Q1, saw trade activity rise by 31.8% in Q2. Transaction volumes in China surged by an incredible 430% when factories reopened at the end of February. Activity rose by a further 14% as lockdown restrictions began to ease in April, but this momentum has begun to plateau.

Average weekly transactions in China have fallen by 8% since the week commencing 15 June, and as impressive as the country’s bounceback has been, trade activity in the last two weeks of June remained 22% lower than the levels Tradeshift saw on its platform in the final quarter of 2019.

“China’s bounceback provides a useful indicator of what the shape of recovery could begin to look like as other countries start to bring the spread of the virus under control,” said Christian Lanng, CEO, Tradeshift.

“A huge domestic market gives China certain advantages in terms of the speed of its recovery. But the interconnected nature of global supply chains means that not even China can fully recover in isolation. The whole ecosystem needs to be in good working order. Right now that is not the case.”

For economies in the West, the green shoots of recovery have begun to emerge, but the overall picture remains volatile. After record lows through April and May, order volumes have begun to trend upwards over the past month. The Eurozone has benefited the most from a ‘post-lockdown bounce’, with the number of orders rising 24% in June compared to lows in April.

Order volumes in the US and the UK have also begun to increase since the end of May, but the surge in activity has been far less pronounced.

And while order volumes are trending upwards, payments to suppliers are not keeping pace with the recovery. Invoice volumes across the EU, UK and US fell by 19% as a whole in Q2, and while activity is picking up heading into Q3, it is doing so slowly. With many suppliers running low on cash after a prolonged period of inactivity, lack of working capital flowing through supply chains could well prevent these suppliers from fulfilling orders, putting a brake on recovery.

“Trying to restart supply chains without fast and predictable access to working capital is a little like trying to start a car without any gas in the tank. It doesn’t get you very far,” said Lanng.

“Government stimulus has done a great job insulating businesses from the very worst of lockdown. But as we enter a new chapter in the pandemic, we need to start looking at fresh ways to unlock liquidity and get it flowing quickly to cash-starved suppliers.”

Tradeshift is working with some of the world’s largest organisations to provide digitized financing options that facilitate the early payment of invoices from suppliers. The company also recently announced a partnership with Denmark’s Export Credit Agency, designed to unlock in excess of $55bn in liquidity through an innovative supply chain finance programme that has been praised by the Danish government.

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