The nation's trade gap looks set to drag on the economy in the first quarter as a "disappointingly soft" export performance underlines the IMF's warnings of an unbalanced recovery, official figures showed yesterday.
The UK's goods trade gap with the rest of the world narrowed to £9.1bn in February, but exports are down to their lowest level since November 2010. The gap is only shrinking because imports are falling even more quickly, thanks to lower imports of "erratic" but expensive goods such as aircraft and aircraft parts.
The IMF warned this week in its World Economic Outlook that the recovery "has been unbalanced with business investment and exports still disappointing" despite the strongest growth for any advanced economy this year.
The UK's overall deficit – including the services surplus – narrowed slightly to £2.1bn, but the Office for National Statistics put this down to one-off factors.
Samuel Tombs, Capital Economics' UK economist, said: "Even in the optimistic case that the overall deficit holds steady at February's level in March, it would still total £6.3bn in the first quarter, about £500m bigger than in the fourth quarter. It seems likely that net trade made a negative contribution to GDP growth in the first quarter. As long as demand in the UK's main Continental export markets remains weak, the UK's economic recovery is likely to depend solely on domestic demand."
Detailed figures showed worrying weakness in exports to the eurozone in February, down 4.1 per cent month-on-month. Taken over the past three months they fell 2.2 per cent against the quarter to November.
"The export performance looks disappointingly soft," Howard Archer, the chief UK economist at IHS Global Insight, said.
Underlying export volumes are up 1.9 per cent in the past year but imports rose almost twice as fast, at 3.7 per cent. Berenberg's chief economist, Rob Wood ,expects net trade to drag on growth over the next two years.