Exports drop hits UK non-European deficit widens

A surprise fall in exports in May pushed Britain into its worst trade deficit with countries outside the EU for five months, writes Diane Coyle.

Slower growth across the Atlantic hit exports to the US, Britain's biggest non-EU market. There was a shortfall for the second month in a row, after a surplus last year and in the first quarter of this year.

The Treasury said there had been little change in the overall trade picture. The deficit in March-May was virtually the same as in December-February. Exports in March-May were 12 per cent higher than the same period last year.

However, Trade Minister Richard Needham said British business must keep up the momentum on its exports drive.

Richard Brown, deputy director-general of the British Chambers of Commerce, said: "The figures continue to show the underlying weakness of the UK economy." There needed to be greater vigour in export promotion, he said.

The non-EU deficit rose to pounds 607m last month from pounds 516m. The underlying deficit, excluding oil and erratic items, rose from pounds 337m to pounds 636m.

Exports fell in value and volume terms. The volume of exports dipped 2 per cent during the month, partly due to lower shipments of erratic items such as ships and aircraft.

The value of imports was nearly unchanged over the month, but the volume jumped by 1.6 per cent.

Import prices fell by 3.8 per cent, the biggest monthly fall in seven years. More than half of non-EU imports are denominated in dollars, against which the pound rose 1.3 per cent last month.

The surplus on trade in oil dipped in May to only pounds 5m, but there has now been a surplus for five months running.

At pounds 150m in the latest three months, it was the highest since early 1988.

Economists drew some comfort from the fact that survey evidence still points to buoyant export orders.