It’s time for UK to build on surge in exports say businesses

HOPES that the economy avoided flat-lining during the summer gathered pace yesterday as figures showed Britain’s goods trade deficit had narrowed more than expected in August.

Business leaders called for fresh measures to support a recovering industrial sector after the Office for National Statistics (ONS) said the trade shortfall had narrowed to a little under £7.8 billion during the month, some £1bn below forecasts.

The value of exports rose 1.3 per cent to £25.5bn, the highest figure since comparable records began in 1998.

The coalition government is banking on strong overseas trade to help support the economy at a time of fiscal austerity in the UK. However, the general economic outlook has deteriorated since August, prompting the Bank of England to embark on a fresh round of money printing last week.

Philip Rush, an economist at banking group Nomura, said: “With the largest revisions made over the past couple of months, this release looks positive for the contribution of external trade to gross domestic product (GDP) growth in Q3.

“Unfortunately, the sharp deterioration in orders recorded by the [Markit/Cips] purchasing managers’ index survey suggests that this strength will not be repeated in September.”

The British Chambers of Commerce welcomed yesterday’s figures, saying a stronger trade performance “must be nourished”. David Kern, the business group’s chief economist, said: “The figures provide a welcome contrast to the steady flow of negative news we have recently. However, we cannot underestimate the challenges ahead for exporters, particularly in the face of the serious problems facing the eurozone.

“The UK government must support a national export drive. Unless we accelerate the pace of export growth and we gain market share from imports in the domestic market, it will be difficult to sustain UK growth.”

The growth in exports in August offset muted gains for imports, which rose just 0.3 per cent to £42.6bn.

A further breakdown of the ONS data showed that the trade in goods deficit with eurozone members had narrowed from £2.4bn to £1.9bn, driven by a 4 per cent monthly increase in the value of goods exported to the single-currency region.

In the three months to August, export volumes excluding oil and “erratics” increased by 0.5 per cent, compared with a 1.5 per cent decline booked in the three months to July. Import volumes also rose by 0.5 per cent, down from a 2 per cent gain in July.

Samuel Tombs, UK economist at Capital Economics, said: “August’s trade data suggest that the economy is considerably better balanced than previously thought and that demand for UK exports has grown despite the intensification of the eurozone debt crisis. However, we fear that this rebound could prove to be short-lived.”

A spokesman for the Treasury said: “Whilst the UK cannot isolate itself from the current global economic and financial uncertainty, the UK government is creating a new model of economic growth that is driven by investment and exports.”