Recovery hopes rise as shrinking trade gap caps good week for Britain

A surprise fall in the nation’s trade gap with the rest of the world capped a stellar week for the British economy yesterday.

The UK’s goods trade deficit tumbled by £1bn to £8.2bn in April, making it £600m smaller than expected and the lowest since January. Including the services surplus, the overall deficit shrank from £3.2bn to £2bn. Net trade knocked 0.1 percentage points off the wider economy in the first three months of the year, but an improved picture means trade is more likely to buoy growth than drag it down in the current quarter – putting the UK on course for two-successive quarters of growth.

It comes as a week of good news has fuelled recovery hopes, including the fastest expansion in more than a year for services and manufacturing firms in May and a return to growth for Britain’s builders.

Car sales have returned to pre-recession peaks. The high street also shrugged off poor weather last month to grow sales, according to the British Retail Consortium.

The figures showed the deficit being closed by imports falling by 2.7 per cent in April, a much faster rate than the 1.3 per cent drop in exports seen over the month. This was due to the sharp narrowing of the trade gap with European Union countries.

Nida Ali, the economic adviser to the Ernst & Young Item Club, said the figures represented an “encouraging start to the second quarter”.