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Trade gap widens again as imports hit record high

Published 09/08/2016

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
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

Britain's trade gap widened again in June after imports reached a record high, according to official figures.

The Office for National Statistics (ONS) said the UK's deficit on trade in goods and services rose to £5.1 billion, growing from £4.2 billion in May.

Imports increased by £1.9 billion to reach a record high of £48.9 billion, while exports rose by just £1 billion.

Britain's trade balance in goods, stripping out the service sector, ballooned to £12.4 billion in June, its highest level for over a year. The ONS said the UK's deficit on trade in goods rose £0.9 billion from £11.5 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.

However, the latest figures show that the UK exported £12 billion worth of goods and services to the European Union in June, an increase of £500 million compared to May.

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.

But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The latest trade figures underline that it takes years, not months, for exchange rate depreciations to boost GDP growth.

"Despite sterling's depreciation, which began in November, the trade deficit widened. Looking ahead, the trade deficit likely will remain bloated in the near-term, as sterling's depreciation will continue to make imports dearer."

The disappointing figures come alongside weak manufacturing figures, which fell by 0.3% in June, well below economists' expectations of 0.0%.

Mr Tombs added: "We fear that the trade boost could take even longer than usual to materialise this time, because exporters will be very reluctant to invest until the UK's future trade arrangements are known. In short, hopes that exports will surge and offset the Brexit hit to domestic demand seem misplaced."

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