George Osborne was dealt a pre-Budget blow yesterday after official figures showed Britain’s trade deficit widening more than expected at the start of the year.
According to data from the Office for National Statistics (ONS), the overall trade deficit, including the UK’s massive services industry, grew to just under £2.6 billion from £668 million in December, led by a disappointing export performance.
The expanding gap between imports and exports of goods and services will dampen hopes of a much-needed rebalancing in the economy.
But there was some brighter news from the construction sector after a surge in demand for repair work amid January’s floods and storms helped building firms emerge relatively unscathed from the extreme weather.
The ONS said output in the construction sector rose 1.8 per cent between December and January, down only marginally on the 2 per cent growth recorded in December thanks largely to a hike in repair and maintenance work from storm-battered households.
The worse-than-expected trade figures suggest the economy has some way to go in reducing its reliance on consumer spending and puts pressure on the Chancellor ahead of next week’s Budget to help boost exports.
Exports of goods decreased by 4 per cent between December and January to £24.2bn, while imports increased by 3.4 per cent to £34bn.
But experts cautioned January’s trade data was likely to be volatile due to erratic levels of imports for ships, aircraft and certain commodities, such as precious stones and silver.
The British Chambers of Commerce said the long-term picture was more encouraging, with a fall in the deficit over 2013 as a whole.