The gap between goods exported and imported widened to a record high in December, official figures revealed today, casting doubt over the impact trade will have on supporting economic recovery in the UK.
The goods trade deficit hit £9.2 billion in December, from £8.5 billion in November, the Office for National Statistics said. The overall trade deficit, which includes services, was £4.8 million, a five-and-a-half year high.
Imports grew 3.5% in value to £33.4 billion, outpacing exports, which grew 1.5% to £24.2 billion, as oil prices continued to boom and light aircraft sales rose, the ONS said. The snow is likely to have impacted trade, but the ONS said the net effect of the weather was still unclear.
The ONS revealed export volumes, excluding oil, fell 1.3% in December, as the Government planned to unveil measures aimed at boosting overseas sales, especially by smaller companies, to help drive the UK's economic recovery.
Today's figures will concern Chancellor George Osborne as they show UK trade is having little impact on economic growth, while rising import and export prices will do little to ease the Bank of England's fears over stubbornly-high inflation.
Last month, the rate of inflation unexpectedly soared to 3.7%, while other figures showed the UK economy unexpectedly contracted by 0.5% in the final three months of 2010.
The Chancellor is banking on private sector industry to offset the impact of his public sector spending cuts.
Vicky Redwood, senior economist at Capital Economics, said: "The deterioration in the UK's trade position in December probably partly reflects the bad weather, but the underlying trend is still pretty dismal."
She added: "The big picture is still that the external sector is not giving the economy the support it needs to weather the fiscal squeeze."
Howard Archer, chief UK and European economist at IHS Global Insight, said the ongoing eurozone debt crisis posed a further threat to the health of UK export trade.
He said: "What is clear is that net trade is currently not contributing appreciably to UK growth as has long been hoped for given the competitive pound and decent global economic activity."
He added: "There is the risk that UK exports could be hit significantly over the coming months by the problems in the eurozone as it is a key market."
A Trade and Investment white paper was launched by the Government today in a bid to provide improved support to firms exporting goods to other countries.
The move came as the British Chambers of Commerce (BCC) said a survey of 8,000 companies showed 5,500 did not export anything, partly because they thought their products were unsuitable or because they had enough business in the UK.
Following the ONS' trade figures, David Kern, chief economist at the BCC, said: "Starting with its trade white paper, the Government must ensure Britain's exporters can break into new markets abroad.
"It is up to the state to remove competitive disadvantages British companies face in key areas such as trade finance, export insurance and trade promotion.
"UK small and medium-sized enterprises in particular need all the help they can get to ensure they can move into fast-growing emerging markets such as China, India and Brazil."Reuse content