Recovery hopes boost after trade deficit drops to £2.6bn

Recovery hopes have received a further boost after figures revealed the gap between the UK's exports and imports dropped by more than expected to £2.6 billion in April.

While the trade deficit showed the UK still exports far more than it exports, it was smaller than the £3.2 billion shortfall in March and better than economists' predictions for between £2.8 billion and £3 billion.

A £1.3 billion fall in imports from Europe, the UK's biggest trading partner, was behind the lower trade deficit.

However, economists criticised the Government's attempts to rebalance the economy towards exports under Chancellor George Osborne's "march of the makers" strategy for being too slow.

An £8.2 billion deficit in Britain's exports of goods was only partially offset by a £5.6 billion export surplus from its dominant services sector.

The UK's growth prospects have been given a fillip by robust data from the UK's services, construction and manufacturing sectors in recent days, adding to hopes that gross domestic product (GDP) can gain on the 0.3% expansion in the first quarter.

Chris Williamson, chief economist at Markit, said: "UK exports fell in May, but the underlying trend is one of modest growth, which should help drive a continuation of the economic recovery into the second quarter."

He added the weaker pound should have handed British exporters a bigger boost, suggesting firms are either using sterling's weakness to rebuild profit margins, or that companies are "simply making goods and services that are not particularly in demand".

David Kern, chief economist at the British Chambers of Commerce, said: "The gap between imports and exports remains too large and we are not yet making sufficient progress in closing it.

"More action is needed to unleash the untapped potential of many British exporters."

PA