UK trade deficit was second-biggest ever
Tuesday 09 October 2012
A further plunge in exports saw the UK rack up its second-biggest trade deficit on record, official figures show.
The deficit in goods and services, the gap between exports and imports, grew to £4.2 billion in August from £1.7 billion in July, the largest since April, the Office for National Statistics (ONS) said.
The deficit in goods alone widened to £9.8 billion from £7.3 billion the previous month as exports to EU countries and non-EU countries fell 0.5% and 7.2% respectively.
Coupled with downbeat manufacturing statistics, the figures cast further gloom over the economy's growth prospects in the third quarter and beyond as analysts warned that any recovery is unlikely to be sustained.
Victoria Clarke, economist at brokers Investec, said: "UK exporters continue to face challenging market conditions, particularly in exporting to EU destinations but globally too."
The figures are a further blow to Chancellor George Osborne who is relying on the economy shifting towards the private sector, particularly in manufacturing and exports, to withstand his far-reaching public sector spending cuts.
Imports of goods increased by £1.5 billion, or 4.5%, from £33 billion in July to £34.5 billion in August, the ONS said.
But the increase in the import of goods reflects higher imports of fuel which was up £1 billion, specifically of oil which rose by £900 million.
Alan Clarke, economist at Scotiabank, said: "With the UK's main trading partner, the eurozone, hardly hoovering up our exports, there is precious little reason why our exports should be flying out of ports.
"If the UK is going to recover in a meaningful way over the coming year, it is going to rely to some extent on firmer demand from abroad. We have our doubts."
The gloomy figures follow a downbeat assessment of the economic outlook from the International Monetary Fund, predicting that the economy would shrink 0.4% this year and only grow by a tepid 1.1% over next year.
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