World Economy

UK Trade Deficit at 8-Year High

UK Trade Deficit at 8-Year HighUK Trade Deficit at 8-Year High

Britain’s trade deficit on goods and services narrowed slightly in March, figures released on Tuesday by the Office for National Statistics showed.

According to data published by the ONS, the UK’s trade deficit on goods and services declined from £4.3 billion ($6.21 billion) in February to £3.8 billion in March, as the deficit on goods and services both narrowed in the period, IBTimes reported.

The trade in goods deficit declined from £11.4 billion in February to £11.2 billion in March as exports increased by £0.4 billion to £23.7 billion on the back of a rise in unspecified goods and machinery and transport equipment.

The trade-in-services surplus, meanwhile, increased from £7.1 billion in February to £7.4 billion in March, the ONS added.

“The narrowing of the trade deficit in March is not much to celebrate,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“It remained bigger than its 12-month rolling average for the sixth consecutive month, and did not make up for dreadful deficits in January and February.”

On a quarterly basis, the total trade deficit for goods and services in the first quarter widened by £1.1 billion to £13.3 billion compared with the previous three months, marking the widest gap since the first quarter of 2008. Across the same period, the trade in goods deficit widened by £1.4 billion to £34.7 billion, which the ONS attributed to a £1.9 billion rise in imports of goods to £104.6 billion.

  Domestic Uncertainty

Economists suggested the slowdown in domestic demand should bear down on imports, helping the trade deficit to narrow further but the outlook for exports remained bleak. Scott Bowman, UK economist at Capital Economics, said: “External demand doesn’t appear to be providing any support to the recovery and is compounding the domestic uncertainty created by the upcoming EU referendum.”

However, he added that the 9% decline in trade-weighted sterling since November could deliver a boost to exporters over the coming months as contracts are renegotiated.

  Deficit With EU

Britain’s trade deficit with the EU has hit another record high in a blow for Prime Minister David Cameron and the Remain campaign.

The gap between the goods imported and exported was £23.9 billion in the first quarter of 2016—up £0.7 billion on the final quarter of last year.

The latest figures from the ONS have been seized on by Brexit supporters who claim it would be in the bloc’s interests to agree a trade deal if Britain leaves.

However, the Remain campaign pointed out that the EU still accounts for 48% of the goods exports.

Although the value of goods sent to the EU increased 1.6% quarter on quarter, imports went up by 2.3%.

The overall trade deficit with the rest of the world also widened by £1.1 billion to £13.3 billion.

  Soggy April

Total sales for the four weeks to April 30 were flat, according to the latest British Retail Consortium-KPMG sales monitor–the second month in a row this has been the case, CampaignLive reported.

Online sales growth in non-food fell to 6.6%–the slowest rate for three years.

“Overall, flat total sales mask a very mixed picture,” Helen Dickinson, the BRC’s chief executive, said. “Some retailers have benefitted from the healthy housing market, while others are more susceptible to the effects of lower consumer confidence and a higher proportion of disposable income going into leisure and entertainment.

“While glimmers of hope are evident, the rapid pace of change in the industry, increasing cost pressures and other businesses burdens remain a cause for concern.”

KPMG’s head of retail, David McCorquodale, said: “Looking at the three months to April, non-food like-for-like growth was particularly weak, especially for fashion and footwear, as the cooler weather dampened the launch of spring/summer ranges.

“On the brighter side, furniture and home accessories continued to fare well as retailers reaped the benefits of well-timed promotions. And there was also some mild relief for the grocers. However, as consumers still appear to be hooked on a diet of discounts, deflationary trends in the sector look set to continue.”