Trade gap cut as UK makes up for Jubilee losses

By DOMINIC JEFF
Published on 12/09/2012 00:00

BRITAIN’s trade deficit narrowed to its lowest level for more than a year in July in the latest indication that the economy bounced back from lost production during the Queen’s Diamond Jubilee celebrations.

The deficit fell to £1.5 billion in July after jumping to a record level in the previous month, official figures out yesterday showed. Exports surged 9.3 per cent to £25.8bn, while imports were down by £700 million, or 2.1 per cent.

Economists welcomed the improvement, but said the turnaround was partly due to the balancing of one-off factors seen in June, when trading was disrupted by the extra bank holiday.

Howard Archer, chief UK economist at IHS Global Insight, said UK exporters still faced problems from a weakened global economy.

But he added: “Nevertheless, the sharply reduced trade deficit in July does provide a further lift to third-quarter growth prospects. Indeed, it is looking ever more likely that gross domestic product growth in the third quarter will more than outweigh the 0.5 per cent quarter-on-quarter contraction suffered in the second quarter.”

Colin Edwards, economist at the Centre for Economics & Business Research, noted the improvement was driven by exports to countries outside the European Union (EU). The UK now exports more to non-EU countries than to its EU partners.

He said: “The change may represent an important shift in the focus of exporters, as emerging economies become more attractive than struggling European markets.”