The Chancellor’s ambitions of rebalancing the economy were dealt another blow today by official figures showing a greater-than-expected deterioration in the UK’s trade balance in February.
Britain registered a £9.4 billion deficit in its trade in goods during the month, according to the Office for National Statistics (ONS), larger than the £8.5 billion City analysts had expected.
Total goods exports, excluding oil, fell to £24.1 billion, down 1.2 per cent on January, with the deterioration mainly due to lower exports to non-EU countries. Exports to the US were down by some £330 million, while exports to France, Germany, Belgium and Luxembourg were up £264 million.
“This highlights the fact that the UK’s largely disappointing trade performance cannot be put down just to the weakness in eurozone domestic markets” said Howard Archer of IHS Global Insight. Goods imports also rose 2.7 per cent on the month to £29.7 billion.
Alan Clarke of Scotiabank described the latest trade figures as “dire” and noted that while the steep depreciation of sterling since last summer had squeezed living costs through higher fuel import prices there had been no discernible beneficial impact on British exporters. “We are going to have to cross our fingers and hope that we might get some good news from stronger exports at some point” he said.
The overall trade deficit — which includes the UK’s traditional services surplus — increased from £2.5 billion in January to £3.6 billion. Analysts said the figures implied that net trade was likely to have a negative impact on the GDP figures from the first quarter, due to be released later this month.
Despite George Osborne’s stated aspiration to build a recovery based on higher exports and lower consumption, the UK’s balance of payments deficit in 2012 came in at £36 billion, the highest level since 2007.
There was, however, some slightly better news today on industrial production, which grew by 1 per cent in February according to the ONS, reversing the 1.3% decline in January. Mining and quarrying output increased by 2.8 per cent. Manufacturing output was also up by 0.8 per cent on the month. This, following last week’s better-than-expected services data, hardened the belief of some City analysts that the UK will manage to avoid an unprecedented triple-dip recession.
But Samuel Tombs of Capital Economics warned that “the big picture is that the economic recovery is still struggling to gain any traction”.