UK deficit narrows with surge in exports
The UK's trade deficit narrowed to £1.5bn in July after jumping to a record level in the previous month, official figures have shown.
Exports of goods surged 9.3% to £25.8bn in July, while imports were down by £700m or 2.1%, according to the Office for National Statistics (ONS).
Economists welcomed the improvement but said the turnaround was partly due to the balancing of one-off factors seen in June, when trading was |disrupted by the extra bank |holiday for the Queen's Diamond Jubilee.
Martin Beck, United Kingdom economist at Capital Economics, said yesterday's official figure showed a surprisingly large improvement following June's “awful” figures, when the deficit rose to £4.3bn.
However, he added: “This is unlikely to herald the start of the long-awaited rebalancing of the economy towards the external sector.”
The rebound in exports is in line with Friday's improvement in the United Kingdom’s industrial output, which showed a 2.9% increase on a month earlier in July.
However, the impact of the eurozone crisis was still felt during the month as the deficit on trade in goods with non-EU countries decreased by £2.2bn.
This is compared with only £700m with EU members.
The proportion of UK goods exports going to eurozone countries fell to 43.6%, the lowest share since records began in 1988, while monthly exports to non-EU countries reached a record high, Mr Beck added.
A spokeswoman for the Department for Business said that increased exports to China and Japan reflected the UK's diverse and strengthening trade relationships.
She said: “Trade plays a key role in getting the UK back on the path to growth.
“Maintaining July's increase in exports is important if we are to rebalance the economy away from debt-fuelled spending to achieve long-term sustainable growth in the future.
“Encouragingly, on both a monthly and three-monthly basis total exports grew while imports fell.”