Export volumes have turned down as the economies of Britain's overseas markets have slowed. But import volumes have continued to rise - despite the dampening effect of the recession on spending - as British firms have lost market share to overseas competitors.
Britain's import bill increased by 1 per cent in August to just over pounds 10bn, the highest figure since April, the Central Statistical Office says. Exports were virtually unchanged at pounds 8.8bn.
The shortfall between exports and imports was pounds 1.19bn in August, up by pounds 60m from the previous month. This was the largest visible trade gap since April, but the figures were flattered by substantial surpluses on trade in oil and erratic items.
The surplus on oil arose from a historically low pounds 48m in July to pounds 233m in August, the largest in nearly two years. This reflected a bounce-back from unusually late and extensive summer maintenance work in the North Sea. The surplus on trade in erratic items - which include ships, aircraft and precious stones - jumped pounds 74m on the month to pounds 263m.
Excluding oil and erratic items, the visible trade deficit widened by more than pounds 300m to pounds 1.68bn. This was the largest underlying deficit since August 1990. In the three months to August the deficit on this basis was pounds 4.23bn, up from pounds 3.77bn in the preceding three months. The Treasury called the figures 'slightly disappointing'.
Excluding oil and erratics, export volumes in the three months to August were 1.5 per cent down on the previous three months, having shown a 1 per cent rise on the same comparison last month. This was the first fall in export volume on this basis since the three months to November last year.
Import volume, which rose to a record level in August, was 1 per cent higher on a three-month on three-month comparison, unchanged from the figure in July.
Kevin Gardiner, chief economist at Warburg Securities, said that the fall in the pound of nearly 10 per cent since Britain pulled out of the ERM last week 'could add up to pounds 1bn to our monthly import bill', by making imports more expensive in sterling terms.
This could push the non-oil trade deficit above pounds 2bn in a couple of months, according to Keith Skeoch of James Capel. He added that the figures were 'atrocious', even before taking account of the massive short-term deterioration resulting from devaluation.
The CSO projected a surplus of pounds 100m in July and August on trade in 'invisible' items such as insurance and tourism. This gave a projected current account deficit in August of pounds 1.09bn and a total so far for the year of pounds 7.84bn. This compares with the Chancellor's Budget forecast for the current account deficit in 1992 of pounds 6.5bn.
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