The UK’s trade deficit stood at £3.2 billion in November, narrowing from £3.5 billion in October, according to data released by the Office for National Statistics (ONS). The value of exports of goods and services increased by 1.2 percent over the month, while imports increased by 0.6 percent. Overall, a £9.4 billion deficit in goods was partially offset by a surplus of £6.2 billion in services.
Over the three months to November, the picture is less bright, however. Total exports fell 2.5 percent compared to the previous three months, while imports fell by just 0.3 percent.
Beneath these headline data, goods imports from the European Union reached a monthly record high of £19.2 billion, spurred on by a resurgence of car sales in the UK. This meant the UK continued to operate a deficit in goods trade with the EU.
The UK’s trade position has been a persistent thorn in the side of economic recovery – and it is not difficult to see why. Half of all the UK’s goods exports are destined for the EU, with 44 percent bound for the Eurozone, where demand for imports has been weakened by ongoing economic stagnation. Where growth is high, for example in China and India, UK exports are much lower – hence the official trips by David Cameron out to the Far East to raise the profile of Britain’s wares. There has already been some refocussing of trade emphasis – the UK exported just 2.9 percent of its goods to China in 2010, which has increased to 4.0 percent in 2013 – but there is clearly scope for further gains.
Going forward, UK exporters should be helped by the recovery taking place in much of the advanced economic world, boosting export expansion over 2014. However, with economic recovery also serving to stoke the UK’s appetite for imports, as evidenced by rising foreign car demand, this is no guarantee that net trade will make a positive economic growth contribution. In order to provide a solid platform for exports over the longer term, the emphasis on tapping into rapidly developing emerging economies will be essential.