UK Trade deficit with EU hits new high of £6bn
The UK trade deficit increased to its widest level for almost a year in September, according to the latest release from the Office for National Statistics (ONS).
The UK imported £9.8 billion more goods than it exported, up from £9.5 billion in August.
Exports of goods to the European Union fell by £0.3 billion to £12.6 billion and imports of goods from the EU increased by £0.4 billion to £18.6 billion, meaning that overall trade with the EU reached a record deficit of £6.0 billion.
The news is a blow to the resurgent UK economy that has grown consustently through the first nine months of 2013 helped by strong activity in the services, construction and manufacturing sectors and increase consumer confidence.
The overall deficit on trade in goods increased by £3.8 billion, to £29.1 billion in the third quarter of 2013, up from £25.3 billion in the second quarter.
The UK traditionally has a surplus in services and this remained the case in September, with a surplus of £6.5 billion.
Overall the trade deficit was slightly up on August at £3.27 billion.
Dr Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The poor trade data indicate that net trade was an appreciable drag on GDP growth in the third quarter and was a major factor why expansion did not come in as high as 1.0% quarter-on-quarter as had seemed possible at one point.
“It is evident that the economy is currently far from seeing a hoped-for rebalancing with a greater contribution from exports,” he added.
This is a blow for the government and George Osborne, the Chancellor who believes a rebalancing of the UK economy towards stronger exports is a vital part of the overall UK economy.
Barclays economist Simon Hayes said: "Imports continue to rise, and we expect net trade to have subtracted from GDP growth in" the third quarter."
The government wants trade to provide a positive contribution to the overall economy and not act as a drag to the overall economic output as measured by GDP.
David Kern, chief economist at the British Chambers of Commerce, said: "The UK is not doing enough to plug the export gap and rebalance our economy towards net exports."
These figures show that the deficit in trade held back the latest GDP estimate for the third quarter of growth of 0.8 per cent as export volumes fell by 4.6 per cent in September and imports went up by 1.3 per cent.
It also wants to wean the UK economy off of being over-reliant on consumer spending and the vital services sector as the main sources of growth in the economy.
Meanwhile, the ONS also reported that activity in the UK’s construction sector grew by less than expected in the third quarter of 2013, by 1.7 per cent against industry expectations of 2.5 per cent.
However, because the construction sector accounts for just 6.3 per cent of the overall UK economy, the figures will have no effect on the third quarter GDP figures.
Mr Archer said: “In itself, this would mean that GDP growth in the third quarter would be shaved down by 0.05 percentage point given that construction output accounts for 6.3% of total output.”
Overall, activity within the construction sector showed that during the 12 months to September, homebuilding went up by 13.6 per cent, while construction overall saw activity levels rise by 5.8 per cent.
My Finances online here
Last Updated (Wednesday, 04 December 2013 08:17)
Sentinel or Skynet - No2EU says Lawson - Google fined again! - Jail Pledge #Fail
- - -
Table Talk - Euro Funding - Kellogs on EU - Germany Immigration concerns
- - -
Farage vs Clegg analysis - EU Renegotiation in doubt - Turkey Customs - more EU Power
- - -
Join us LIVE - Turkey Twitter - African Union - EU Big Bang
- - -
Criminal Sanctions - Greece bans Protesting - Holiday on EU - Groundhog Day
- - -