Reliance on domestic demand causing slump in UK exports
Exports of goods from the UK fell to their lowest level for more than three years in February, according to official figures likely to dampen optimism over a surge in manufacturing and better prospects for the economy.
Trade data from the Office for National Statistics (ONS) showed the overall deficit narrowed to £2.1bn from £2.2bn the month before, as imports also fell.
But exports of goods dropped to £23.5bn, their lowest level since November 2010.
Economists said the data suggested the recovery was still too reliant on domestic demand, blunting hopes that a pick-up in trade with the rest of the world will help to make the UK's consumer-driven upswing more balanced.
It comes a day after figures showed the manufacturing sector had notched its best year-on-year improvement for three years, while the International Monetary Fund said the UK was on course for the strongest growth among the G7 this year.
Yesterday's ONS release showed the deficit in goods in February narrowed from £9.5bn but was still a substantial £9.1bn.
The UK's powerhouse services sector saw its surplus shrink from £7.3bn to £7bn.
Hopes for the UK car industry were dealt a blow as the figures showed exports dropped £44m and imports rose by £404m.
The ONS pointed out that the total trade deficit in the three months to February had nearly halved from £8.7bn to £4.8bn.
This was driven by imports reducing by more than exports, rather than a boost in the latter.
Samuel Tombs, UK economist at Capital Economics, said: "February's trade figures showed that the economy is still struggling to rebalance towards exports.
"As long as demand in the UK's main continental export markets remains weak, the economy is likely to struggle to rebalance towards exports.
"What's more, strong growth in investment, which is typically import-intensive, is likely to prevent the overall trade deficit from narrowing much.
"For now, then, the UK's economic recovery is likely to remain largely a domestic affair."
David Kern, chief economist at the British Chambers of Commerce, said: "While our net trading position is gradually improving, the pace is far too slow for what the economy needs. It will be incredibly hard to meet the Prime Minister's export target of increasing exports to £1tn by 2020."
Increasing exports out of Northern Ireland has been identified as a major priority for business and government.
The Programme for Government of 2011 to 2015 contained the aim of increasing the value of manufacturing exports by 20%. According to this week's Northern Ireland Chamber of Commerce's quarterly economic survey, businesses are reporting an increase in both domestic and export sales in growing numbers.
However, smaller companies – and especially those with less than 10 employees – were not recovering at the same pace. Fewer small businesses were reporting increased sales and exports.
Northern Ireland Chamber of Commerce chief executive Ann McGregor (above) welcomed the increase in exports for larger companies, but said more encouragement was needed.
"More support for exporters is just one way the government can do more to ensure the recovery is a sustainable one," she added.