Fresh economy woe for Osborne as trade gap balloons
THE UK’s goods trade deficit widened to a larger-than-expected £9.8 billion in September as world economic woes weighed on UK firms, creating a fresh headache for Chancellor George Osborne.
Data from the Office for National Statistics (ONS) yesterday showed the worst ever quarterly goods deficit with Germany – the UK’s largest national trading partner – at £7.1bn, and the trade surplus with the US at a near eight-year low.
The overall deficit for September – including a £7bn surplus for the UK’s dominant services sector – was £2.8bn, up from £1.8bn in August.
Figures showed the goods deficit with all foreign countries increased to a higher than expected £9.8bn for the month, up from £9bn in August. It was £29bn for the quarter – the worst three-month figure for a year. Goods exports increased by £1bn to £24bn in the month but imports rose by £1.8bn, mainly reflecting fuel imports.
But the figures relating to Germany showed how the struggles of Europe’s biggest economy were weighing on UK manufacturers, with exports slipping and the monthly goods deficit with the country of £2.5bn at its highest level since last November.
However there were improvements to the deficits with China and Hong Kong.
Maeve Johnston of Capital Economics said: “September’s trade figures provide further evidence that the UK economy is struggling to rebalance towards the external sector. Looking ahead, exporters are likely to struggle further over coming months given the strong pound and weakness in the eurozone.
“But with UK exports still competitively priced in foreign currency terms, we remain optimistic that exporters will benefit from stronger global growth next year.”
Markit chief economist Chris Williamson added: “The weak export performance largely reflects a lack of demand in the eurozone, which is once again teetering on the brink of another recession.
He said separate survey evidence suggested the trade situation looked likely to have deteriorated further in October.
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