Britain’s trade deficit ballooned to its highest level since modern records began following a sharp drop in exports
Britain’s trade deficit ballooned to its highest level since modern records began in June following a sharp drop in exports – with particularly weak demand from countries outside the crisis-ridden eurozone.
Hopes of a rebalancing of the economy towards overseas sales were dented with the release of official figures showing the gap between imports and exports widened from £2.7bn to £4.4bn.
Although Britain’s export performance has been hampered by the prolonged crisis in the eurozone, the 4.6% drop in the value of overseas sales in June was largely the result of weaker demand from countries outside the European Union. Exports to the US, where the economy has been slowing down in recent months, fell sharply.
The Office for National Statistics said the UK trade deficit was the largest since comparable records began in 1997 and were made up of a £10.1bn in trade in goods, offset by a £5.8bn surplus in services.
City analysts said the figures were poor even when allowing for the disruption to business caused by the extra bank holiday in June to celebrate the Queen’s Diamond Jubilee.
They noted that the trade gap for the second quarter – a better guide to the underlying trend than one month’s figures – increased from £7.8bn to £11.2bn, enough to wipe 1% off economic growth.
Chris Willliamson, economist at Markit, said: “The fall could perhaps be in part blamed on the disruption to shipments caused by extra holidays for the Queen’s Jubilee, but there is clearly an underlying trend of worrying weakness in overseas demand.” He added that the fall in exports in the second quarter was the biggest since 2006.
Vicky Redwood, UK analyst at Capital Economics, said that if the extra bank holiday had affected shipments through UK ports, it should have affected imports – down only 0.7% in June – as severely as exports. “And previous extra bank holidays have not had that big an impact. In June 2002, the month of the Golden Jubilee, the deficit widened by only £0.4bn.”
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