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UK's trade gap widens as exports slip back

Published 08/07/2016

Economists predict British exports will rise following sharp falls in the value of the pound
Economists predict British exports will rise following sharp falls in the value of the pound

Britain's trade gap widened in May after exports slipped back from a rise in April, according to official figures.

The Office for National Statistics said the UK's deficit on trade in goods and services hit £2.3 billion in May, growing from £2 billion in April.

It said the UK's trade deficit on goods expanded to £9.9 billion, up from £9.4 billion in April, as the UK recorded a sharper fall in exports than imports.

It said exports in goods slipped £2.1 billion to £23.7 billion, while imports tumbled £1.6 billion to £33.5 billion in May.

The UK is looking to bolster its trade with the rest of the globe to help drive economic growth after voting to leave the European Union.

Economists predict British exports will rise following sharp falls in the value of the pound, which are making UK goods more attractive to overseas buyers.

Sterling slumped to a 31-year low on Wednesday, slipping below 1.28 US dollars for the first time since 1985 at one stage and also dropping as low as 1.16 euros.

The ONS said total exports fell by 4.4% or £2 billion to £43.1 billion between April and May.

It added that exports of goods to EU countries decreased by £0.3 billion over the period, while exports of goods to countries outside of the EU fell by £1.8 billion.

Howard Archer, chief European and UK economist of for IHS Economics, said: " With UK domestic demand likely to be pressurised substantially by prolonged, heightened uncertainties following the vote to leave the European Union in the June 23 referendum, one hope has to be that the substantially weaker pound will feed through to boost export volumes."

He added: "However, there is no guarantee that the markedly weakened pound will provide a major boost to UK exports. Furthermore, the UK's decision to leave the European Union will likely dampen European growth and could also very well have some global impact, which will hamper UK exports."

A spokesman for the Department for Business, Innovation and Skills said: "We are committed to boosting exports and supporting UK companies as they seize the global demand for their goods and services.

"As part of this, we are prioritising nearly 200 campaigns around the world that could be worth up to £70 billion a year by 2020."

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