Eurozone crisis could widen UK trade deficit

Britain’s trade deficit could widen over the coming months as the eurozone crisis stifles demand for exports, economists warned yesterday.

Although the overall trade deficit on good and services narrowed to £2.7 billion in March, exports to EU countries were virtually unchanged at £13.2bn.

Fresh uncertainty over Greece, where new elections are planned following yesterday’s collapse of talks to form a government, saw the FTSE 100 close 0.5 per cent lower at 5437.62 after a 2 per cent fall the previous day wiped £28.5bn from its value.

The market had been up earlier in yesterday’s session after figures showed better-than-expected economic growth in Germany helped the eurozone avoid recession in the first quarter. Strong exports helped Germany’s economy grow 0.5 per cent in the first three months of the year, offsetting zero growth in France and recession in Italy and Spain, leaving the 17-member eurozone stagnating but not in recession.

Osman Ismail, an analyst at the Centre for Economics and Business Research, said: “We could expect further deterioration in the UK’s trade balance, given the zone’s strategic importance as a trading partner.”

In contrast, the goods trade deficit with non-EU countries narrowed, as the value of exports surged by 12.1 per cent to £13.2bn, driven by increased exports of chemicals and pharmaceuticals to the US and China.

GARETH MACKIE