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Trade gap up to £5.2bn in September after exports struggle

Published 09/11/2016

The goods and services deficit - the gap between exports and imports - rose from £3.7 billion in August as exports fell by £200 million and imports lifted by £1.2 billion
The goods and services deficit - the gap between exports and imports - rose from £3.7 billion in August as exports fell by £200 million and imports lifted by £1.2 billion

Britain's trade gap widened to a worse-than-expected £5.2 billion in September as the plunging pound offered little help to boost flagging exports.

Figures from the Office for National Statistics (ONS) showed the goods and services deficit - the gap between exports and imports - rose from £3.8 billion in August as exports fell by £200 million and imports lifted by £1.2 billion.

The trade gap narrowed overall in the third quarter to £11 billion from £12.7 billion in the previous three months as exports of goods rose by 6.1% thanks to strong overseas demand in the immediate aftermath of the Brexit vote.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures "pour more cold water on hopes that sterling's depreciation will drive an export-led revival".

He said the Brexit-hit pound may help net trade next year but warned "the restructuring of the economy towards exports look set to be particularly sluggish".

The ONS said imports of goods hit a record £38.8 billion in September, up by £1.3 billion since August, due to increased UK demand for ships, material manufactures, road vehicles and oil.

Goods exports dropped by £200 million to £26.1 billion in September, leaving the overall goods deficit at a mammoth £12.7 billion.

The figures showed that exports of goods to EU countries rose by £100 million or 1.1% between August and September, while imports from the EU rose by £1 billion or 5% to a record £21.3 billion.

This left the goods deficit with EU countries at an all time high of £8.7 billion in September, according to the ONS.

The goods deficit with countries outside the EU widened by £700 million in September.

Chris Williamson, chief business economist at IHS Markit, cautioned against reading too much into the volatile monthly figures.

He said the third quarter figures suggested exports had supported the wider economy's 0.5% expansion between July and September, adding it should also contribute to fourth quarter growth.

International Trade Secretary Liam Fox said the third quarter figures are a " positive boost for British businesses and shows clearly the UK remains an attractive place with which to trade and do business".

"But there is clearly still a lot of work to do to, and that is why we will be supporting UK businesses as we reach out to new markets to position the UK as a global leader in free trade," he added.

Hannah Finselbach, a statistician at the ONS, said the pound's recent plunge was not thought to be the main driver behind Britain's improved trade gap in the third quarter.

She said: "In this first full quarter since the EU referendum, there was a small reduction in the trade deficit, but so far there is little evidence in the data of the lower pound feeding through into trade volume or prices."

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