Island focus: specialist materials

2015 was a year of reduced trade for the UK leather industry, with total exports of raw hides and skin, and part-processed and finished leather down 7.3% from 2014, to £343 million. Total imports were also down by 6.6% compared with 2014, at £195 million. While the UK achieved a trade surplus for total exports (raw hides and skins, and leather), a deficit of £6.32 million on trade of part-processed and finished leather was recorded, a marked reversal of the trade surpluses of previous years.

Some of the fall in export value can be attributed to the significant decreases in raw material prices observed in the second half of 2015, but the greater part is due to a very large fall in the export value of wet-blue and crust leather, down 43.2% on 2014. This fall in value and volume, and the resulting trade deficit for leather, is due to large falls in exports to a number of key countries, suggesting either a downturn in leather production or a shift to cheaper materials. However, exports of finished leather rose by 10.5% over 2014, indicating a growing demand for British leather.

Domestic and international

The UK industry has a market presence across the globe; UK-manufactured finished leather is sold in over 80 countries. However, the majority of trade, in raw hides and skins, wet-blue and crust and finished leather, is transacted with five to ten trading partners per category and often dominated by one or two.

As in 2014, the top five sources supplied over 90% of raw material imported into the UK, with the vast majority comprised bovine hides from the Republic of Ireland. However, overall imports were down by 25.9% and 36.4% in value and volume, respectively. The export market for UK hides and skins was also largely comprised of the five top importing countries, and dominated by China and Italy.

Italy remained the main market for bovine hides and small increase in the volume of exports was seen in 2015, albeit that the value of exports fell by 19.3%. China remained the largest market for sheepskin but, as with hide exports, an increase in volume (5.7%) was countered by a decline in value (-6.9%).

Global picture

The fall in the value of raw material trade is symptomatic of the issues seen across the world during 2015, where a fall in demand for leather led to a rapid and, in some cases, significant fall in demand for and cost of raw materials.

The trade in wet-blue and crust leather saw the most dramatic changes through 2015, with a 43.2 and 33.1% decline in export values and volumes, respectively. These reductions were almost entirely attributable to falls in exports to the key markets in Italy (down 43.5% year on year) and China (down 39.8%).

In spite of the reductions, Italy and China remained the key destinations for British wet-blue and crust leather, and the top five markets accounted for over 92.0% of total exports. Imports of wet-blue and crust leather also fell in value and volume, down 26.5 and 14.4%, respectively.

In contrast to the other markets, the import and export of finished leather increased in value and volume. The top countries exporting to the UK accounted for 78.7% of all imports of finished leather, with Italy and Germany remaining the key trade partners, albeit that the value of imports from both countries was slightly reduced. However, imports from Argentina rose by 188% in 2015 and were primarily responsible for the increase in imports versus 2014.

The US remained the top export market for British finished leather, up 34.8% on 2014, with the biggest growth in the German market, up 84.1% and accounting for the majority of the increase from 2014. The increase in exports to the US and Germany was countered by a small fall in exports to Portugal and Hong Kong. ?