London: The UK’s trade deficit decreased slightly in the three months to February, because falling imports have outpaced a drop in exports.
Imports over the three months fell by 4.7 per cent, while exports decreased by 2.5 per cent, meaning the trade deficit in goods was £26.2 billion for the period.
Because the trade deficit statistics are volatile, the Office for National Statistics advises focusing on the three-month rather than the monthly data.
According to the monthly figures, the trade deficit for February was £2.1 billion, essentially flat compared with January’s £2.2 billion. There was a £9.1 billion goods deficit, which was partially offset by an estimated £7 billion surplus in services.
Alan Clarke of Scotiabank said the data were slightly better, but that the big picture has not changed and net trade was unlikely to contribute to economic growth.
“That is not to say that Q1 growth will suffer. Most likely the weakness of net trade will be made up for by inventories or another component,” he said.
Samuel Tombs, UK economist at Capital Economics, said the figures showed that the UK economic recovery remained reliant on domestic demand. “Even in the optimistic case that the overall deficit holds steady at February’s level in March, it would still total £6.3 billion in Q1, about £0.5 billion bigger than in Q4,” he said.
“Accordingly, it seems likely that net trade made a negative contribution to GDP growth in the first quarter. As long as demand in the UK’s main continental export markets remains weak, the UK’s economic recovery is likely to depend solely on domestic demand.”
Increasing UK exports is a priority for George Osborne, the UK chancellor. On Monday, he announced that the Bank of England will support export finance for the first time, with the aim of increasing availability and cutting the cost of private-sector lending for exporters.