UK trade dependency on China hits record high as share of critical imports surge during pandemic

The Prime Minister’s pledge last summer to launch ‘Project Defend’ aimed at reducing the UK’s dependency on Chinese imported goods has been slammed by a leading business group. Analysis shows the UK’s dependency on items critical to both our national and economic security has increased over the course of the pandemic.

In 2020, amidst the height of the pandemic, the share of imports from China reached a record high of 12 per cent (£54.4bn). From 2019 to 2020, two-thirds (62 per cent) of imports for which the UK was already heavily dependent on China have increased even further. These include items the Government itself lists as essential to the UK’s disaster relief capability, such as penicillin, antibiotics, disinfectants, and PPE; rare earth minerals, including tantalum and tungsten essential to manufacturers such as Rolls Royce; and key components needed to drive the UK’s ‘fourth industrial revolution’, including printed circuit boards and semiconductors.

Collectively, the products are imported by approximately 28,000 UK companies many of which are small, family run and unable to mitigate serious disruptions to their supply lines.

The findings come as part of a unique in-depth analysis of HMRC primary trade data and FOI requests by the Independent Business Network of family owned or run businesses.

The study reveals for the first time the increasing scale of the UK’s manufacturing dependency on China in key areas, including healthcare product dependency; biosecurity disaster relief; electronics; aerospace; and telecommunications infrastructure.

Biosecurity Disaster Relief Imports and Healthcare Product Dependency

The Government lists 183 products required for its disaster relief response to the biosecurity disasters, such as Coronavirus. Of these, 123 product types saw the proportion imported from China increase since the start of the pandemic. They include essential items, such as disinfectants, diagnostic test kits, face masks, PPE, and adhesive dressings.

Last year saw disaster relief imports from China spiral to £12.26bn (26.55 per cent of the import market). Up from just 7.71 per cent (£2.46bn) in 2019. Over the same period the share of these goods imported from countries including the USA, France, Germany, and Italy fell.

In the 12 months to March 2021, 72.59 per cent of all imports of key chemicals used in disinfectants came from China.

Of the three types of medical gloves: plastic-coated, vulcanised rubber, and gloves made of nonwovens – China holds 71 per cent, 52.3 per cent and 88.3 per cent of the UK’s import market respectively.

The ratio of imports to exports for single-use gowns rose from £15 million: £7 million (2:1) in 2019-20 to £1.4 billion: £5 million (280:1) for 2020-21.

Electronics

Printed Circuit Boards

Printed circuit boards (PCB) are central to the Fourth Industrial Revolution and are integral to consumer electronics, driverless cars, robotics, artificial intelligence, and 5G.

In 2006 the UK was a net exporter of PCBs. Today it is a net importer. In 2010, 28 per cent of the UK’s PCB imports came from China, this has now risen to 39 per cent in 2020 ($143 million).

In 2019, over half (58.7 per cent) of the UK’s imported printed circuit electroplating and electrolysis machines were from China.

Semiconductors

In 2020, China was the UK’s largest source of semiconductors accounting for one-fifth (20 per cent) of imports. The type of semiconductors the UK imports from China are integral to medical devices, camera equipment, telecommunications equipment, and the aerospace industry.

China holds a 70 per cent share of global Silicon Carbide (SiC) production capacity (2.2 million tons of a global 3 million tons capacity) essential to the manufacture of some semiconductors.

Aerospace

The IBN estimate there are 2,100 products imported from China that are integral to the aerospace industry.

Rare Earth Elements (REEs)

China dominates the global market for Rare Earth Elements (REEs) where it accounts for 81 per cent of the world’s supply. Many of these metals are critical to the aerospace sector.

In 2019, 70 per cent of the metal Praseodymium was imported from Chinese producers. The metal is important in the manufacture of aerospace gearbox casings and engine frames. Supply constraints are not an abstract risk. In August last year, China threatened to withhold the export of the metal.

China accounts for 63.9 per cent (up from 23 per cent in 2010) of the UK’s supply of unwrought Tantalum, used, for example, by Rolls-Royce in their jet engines as well as other products.

Chinese imports of Tungsten, used for the creation of superalloys and in the manufacture of rotor blades and propellers has increased from 55.87 per cent in 2010 to 87.56 per cent in 2020.

In 2020, 55.87 per cent (up from 5.1 per cent in 2010) of non-alloyed Aluminium was sourced from China – vital to the aerospace sector for the manufacture of aircraft wings and fuselages, including in the manufacture of the Eurofighter.

Telecommunications Infrastructure

With the UK lacking significant operators in international telecoms, China, in the form of Huawei, has been able to enter unopposed into the UK market. China’s share of UK telecoms imports has grown from 22 per cent in 2015 to 43 per cent in 2021. This has been driven by Chinese Government backing of Huawei and ZTE, and restricted access for their competitors to China.