Belfast Telegraph

UK goods trade gap adversely affected by volcano

By Russell Lynch

The UK goods trade gap with the rest of the world failed to narrow in April during a month impacted by Iceland's volcanic ash cloud, figures showed today.

The goods trade gap with the rest of the world remained broadly unchanged at £7.3bn, the Office for National Statistics (ONS) said.

The figure disappointed experts looking for a boost in exports to help the UK economy and offset looming Government belt-tightening.

"It is looking increasingly unlikely that export growth will pick up sharply enough to offset the effects of the fiscal consolidation, at least in the near-term," Capital Economics economist Vicky Redwood said.

Total goods exports and imports both fell by £100m as European airspace closed down due to safety fears.

The ONS said trade with non-European countries was likely to have been worse affected due to the greater share of goods shipped by air.

Exports to non-EU countries fell by £200m or 2.5% with non-EU imports £300m or 2.1% lower - contrasting with a slight rise in imports and exports from the EU.

The figures also showed a slight widening in the goods trade gap with EU countries from £3.2bn to £3.3bn over the month.

The weakness of the pound has bolstered the competitive position of UK firms in Europe with exports to the EU rising to £11.6bn during the month compared with £9.9bn a year ago.

But the sovereign debt fears which have hit several European countries have sparked concerns over the cuts to come to tackle deficits - impacting growth - while doubts over the health of the euro have seen the single currency fall to its lowest level against the pound since November 2008.

Ms Redwood added: "The continued problems in the euro-zone have raised the risk that export orders start to flag again.

"Not only does the outlook for euro-zone demand look weak, but the pound has risen by about 10% against the euro over the past three months."

Following 18 months of a deep recession, Britain's economy grew by 0.4% in the fourth quarter of last year and the recovery continued weakly in the first quarter of the new year with GDP up by 0.3%.