UK trade deficit narrows to £1.5bn

The UK's trade deficit narrowed to £1.5 billion in July after jumping to a record level in the previous month, official figures showed today.

Exports of goods surged 9.3 per cent to £25.8 billion in July, while imports were down by £700 million or 2.1 per cent, according to the Office for National Statistics (ONS).

Economists welcomed the improvement but said the turnaround was partly due to the balancing of one-off factors seen in June, when trading was disrupted by the extra bank holiday for the Queen's Diamond Jubilee.

Martin Beck, UK economist at Capital Economics, said today's figure showed a surprisingly large improvement following June's “awful” figures, when the deficit rose to £4.3 billion.

However, he added: “This is unlikely to herald the start of the long-awaited rebalancing of the economy towards the external sector.”

The rebound in exports is in line with Friday's improvement in UK industrial output, which showed a 2.9 per cent surge on a month earlier in July.

However, the impact of the eurozone crisis was still felt during the month as the deficit on trade in goods with non-EU countries decreased by £2.2 billion, compared with only £700 million with EU members.

The proportion of UK goods exports going to eurozone countries fell to 43.6 per cent, the lowest share since records began in 1988, while monthly exports to non-EU countries reached a record high, Mr Beck added.

A Department for Business spokeswoman said increased exports to China and Japan reflected the UK's diverse and strengthening trade relationships.

She said: “Trade plays a key role in getting the UK back on the path to growth. Maintaining July's increase in exports is important if we are to rebalance the economy away from debt-fuelled spending to achieve long-term sustainable growth.

”Encouragingly, on both a monthly and three-monthly basis total exports grew while imports fell.“

PA