Roughly 200 years ago David Ricardo hypothesised that trade between economies works most efficiently when each country specialises in the goods and services that they are relatively better at producing — a theory subsequently known as Comparative Advantage. These gains are likely to be strongest when countries trade with others that have very different specialities.

Based upon these ideas, Fathom’s proprietary RiCArdo tool utilises detailed trade data to uncover an economy’s ‘revealed comparative advantage’ (i.e. which sectors an economy appears to be relatively better at). Unsurprisingly, the tool reveals that the UK’s comparative advantage lies in the financial, insurance and pension services sectors. But RiCArdo allows us to go further than that. By comparing each country’s revealed relative specialisms, we can see where the most efficient trading relationships could be struck…

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