Recovery hopes dented by widening British trade gap

The latest Office for National Statistics data showed an unexpected 0.8 per cent fall in industrial output in May. The UK’s trade deficit also widened by £300 million, hitting £2.4 billion compared to £2.1bn in April.

Both sets of figures came after a number of updates in recent days, including retail sales and house prices, which had suggested the economy was picking up.

Howard Archer, chief economist at IHS Global Insight, said the sharp drop in manufacturing output and the widening trade deficit provided a “double reminder that the UK still has a tough job in developing sustained, significant growth”.

Although he said the drop in manufacturing output was “undeniably disappointing”, he also pointed out it was at odds with a generally-improving picture highlighted by other surveys.

Chris Williamson, chief economist at Markit, said that the manufacturing figures were often volatile and should be treated with some caution.

David Kern, chief economist at the British Chambers of Commerce, said the fall in exports in the latest balance of trade figures was more worrying.

“Overall, our trade deficit is still too large, and we are not making fast enough progress in rebalancing our economy towards net exports,” he said.

Colin Edwards, of the Centre for Economics & Business Research, warned that growth was more-heavily reliant on support from domestic demand.

He said: “With business investment remaining woefully subdued at close to 2003 levels this leaves only households and government, which are attempting to balance their books, to prop up this demand.