There was a sharp intake of breath when chancellor George Osborne, in his 2012 budget speech, challenged UK businesses to double their combined exports to £1 trillion by 2020.
He said he wanted to see 100,000 additional companies exporting, which would average out at around 1,000 taking the leap for the first time each and every week until the end of the decade. Setting ambitious economic targets is what governments do, but just over a year on, Osborne's words sounds foolish.
It's now been 30 years since the UK slipped into a trade deficit (since 1983, the country has been importing more than it exports). 2012's deficit is the highest since the post-war malaise of 1948.
The British pound has lost 20 per cent of its value since the beginning of the financial crisis. Ordinarily, this would serve to boost exports: when the pound is weak, those paying with foreign currencies can get more bang for their buck, since the goods cost less. In 1997, for example, the South Korean won lost 35 per cent of its value and the country's exports grew by 15 per cent.
Last year, though, UK exports fell by 1.5 per cent. While Osborne is pinning his hopes of recovery on the UK selling its way out of trouble, net trade is having a negative impact on UK GDP. Something is clearly not right.
Diagnosing the problem
It's no coincidence that the UK has spent three decades drowning in a trade deficit, since it's about the same length of time since the country shifted from a manufacturing to a service-led economy.
Under the supervision of Margaret Thatcher, industry and production lines were closed down and outsourced. The financial Big Bang in 1986 - when London's markets were deregulated - led to a huge growth in professional service sectors, such as banking, law, accountancy and consultancy. As illustrated by the crash, these industries are volatile and arguably, the wrong sort of things to be exporting in 2013.
The world's fastest-growing importers (China, India, Indonesia, Brazil, etc) import very few professional services, relatively speaking. While the likes of Germany, with its massive and robust manufacturing base, have been taking advantage of emerging market growth, Britain has been left to look enviously on from the sideline.
As well as changing its contents, the UK also needs to seriously consider the destination of its exports basket. "Look at recent stats," a senior banker at Barclays told me. "In the last five years, the UK has not changed its export profile outside the eurozone in any meaningful way. There are a lot more opportunities outside Europe than inside. Emerging markets are booming: China, Brazil, Russia, India, Africa. The UK needs to have the courage to look beyond the immediate shores. It's still not quite happening."
Half of the UK's exports still go to the EU, much of which is in a perpetual state of economic shrinkage. At the recent G-8 summit in Enniskillen, leaders set the wheels in motion for a free trade agreement between the EU and the US. While this might have some benefit to exporters, many commentators expressed indifference. Tariffs between the two are already low and if the governments really wanted to make a statement, they'd be deeper in discussions with the BRICs about a similar pact.
Just 8 per cent of UK exports go to the BRIC economies and while that figure is up from 5 per cent in 2008, it's viewed as a disappointment. It's natural, then, to wonder whether the UK has the calibre of company needed to come anywhere near Osborne's targets and if so, whether they've got the support to meet their potential
Blaming the bankers
A Singaporean banker recently told me that the UK doesn't possess the correct collective attitude to become a successful exporting country again. He encouraged me to look at his home country and other, similarly-sized economies such as Belgium, the Netherlands and Taiwan, where entrepreneurial culture is much stronger than here. In Britain, it's more common nowadays for young people to desire good positions at large companies, rather than wanting to set up their own. "You excel at corporations," he told me, "but your SMEs could learn a lot from those countries."
His viewpoint is common in the financial sector, but if you put it to any number of business-owners, however, you'll likely get a chilly response. They'll tell you that there are plenty of viable exporters, some of which have full order books, but they can't fulfill them because of a lack of access to finance.
I spoke to a director of a small manufacturing firm at a recent event who wanted to take out a loan to buy a piece of machinery, which would allow them to stop outsourcing parts of their manufacturing process, making huge cost reductions in the process. His bank - Lloyds - knocked him back because he refused to put his house up as collateral. The banks say they want to lend money and that they are lending money, but the evidence - statistical and anecdotal - says otherwise.
In the final quarter of 2012, bank lending in the UK fell by £2.7 billion, despite the fact that banks themselves have access to cheap government loans as part of the Funding for Lending scheme (FLS). Lloyds drew £3 billion from the FLS but trimmed £5.6 billion from its lending book in Q4. RBS has cut £2.6 billion from its total credit lines, leading the 81 per cent state-owned bank to commission a review of its lending to small businesses.
"Unless you've got a really good story, are willing to put a lot of personal guarantees up and accept stringent criteria around the finance, you probably won't get very far with the banks," Graeme Fisher, head of policy at the Federation of Small Businesses (FSB) tells me down the phone. "Banks are quite risk-averse and they want the entrepreneur to put a lot of skin in the game."
Fisher uses the example of a high-tech manufacturing company that required a loan of £5 million to support its exports to another manufacturer in Silicon Valley, which it was providing with parts. "They had to go to America to get the money because none of the British banks would support them."
It's a common tale: small businesses, seen as the engine needed to power the economy forward, are unable to secure the finance they need to export. In the post-financial crisis landscape, banks are asking for more collateral in order to part with cash, for fear of having their fingers burnt again.
Government's efforts to stimulate the economy and bank lending through schemes like FLS and devices such as quantitative easing have failed: the money has gone straight to the banks, who are using it to beef up their reserves ahead of incoming legislation such as Basel III, which requires them to hold more capital than ever before. It's an unvirtuous circle.
What's the solution?
In contrast to the free-market ideology of many Conservative governments of yore, George Osborne might find that if he's to avoid abject failure, the invisible hand guiding the economy may have to be replaced by his own pasty paw. When banks aren't providing the liquidity needed to oil the gears of the trade economy, governments often have to step in.
Part of the reason the US has managed to make a moderate recovery is because of the mandate given to the Export Import Bank of the United States (Exim Bank) to support American exports. The Exim Bank is what's known as an export credit agency (ECA) - a public body, funded by the taxpayer that insures companies who borrow from commercial banks in order to export. Exim Bank also issues direct loans to local businesses to fund their trade activities, and often lends to overseas companies wishing to buy American goods too. Last year, it supported around $30 billion (£20 billion) of US exports.
Most countries (above a certain size) have an ECA, but the UK's version has come in for much criticism for its relative inactivity. Last year, UK Export Finance (UKEF) covered just £2.32 billion of UK's exports. Unlike the Exim Bank and some of the other more active ECAs (South Korea's Kexim, Japan's JBIC and Germany's Euler Hermes are among the most visible), it doesn't yet provide loans to overseas companies to purchase UK goods. It's also been harangued for supporting the biggest and most controversial of the UK's exports (it's commonly aided the purchase of weaponry and military craft).
Another part of the solution could be the "Business Bank", a government-owned lender due to disburse its first loans in 2014. To date, though, just £300 million has been pledged by the government. If the bank is to have any noticeable effect on the economy, it needs to be backed with significantly more capital.
But in short, there isn't one single panacea for the UK's exports woes. It's unlikely that the country will return to its former place at head of the global trade table. In fact, as other economies develop further, it's sure to slip down the exports rankings at a steady rate.
But the slide can be arrested, to an extent. The Japanese prime minster Shinzo Abe's recent injection of money into his economy (known as Abenomics) is an attempt to buck decades of deflation. He's shown awareness that drastic change requires drastic action. Osborne's rhetoric has been, thus far, only that. If he's serious about saving UK exports, decisive action is required, and fast.