Trade deficit 'freeze' casts doubt on recovery plan

Britain's overall trade deficit remained unchanged in April, official figures yesterday revealed, raising doubts over the impact exports will have on the economic recovery.

The gap between goods and services imported and exported held at 2.8 billion in April, the Office for National Statistics (ONS) said, while the trade deficit on goods narrowed to 7.4bn from 7.7bn.

The ONS reported a 0.1 per cent increase in exports of goods, but the overall improvement was driven chiefly by a 0.9 per cent drop in imports, as fewer consumer goods, such as cars and clothes, were brought into the country.

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Chancellor George Osborne is banking on the private sector and strong net trade - when exports outweigh imports - to offset the impact of public spending cuts. Earlier this week, the IMF backed his deficit-busting plans, but on the assumption private investment and stronger trade would buoy the economy.

In the first quarter of 2011, net trade made a significant contribution to the 0.5 per cent growth in GDP. But economists warned that April's figures suggested the contribution to growth in Q2 from net trade would be less significant.

Howard Archer at IHS Global Insight said: "The trade performance in Q1 raised hopes that exports are increasingly benefiting from decent global growth and a competitive pound. However, the latest data suggest that it remains a struggle to generate sustained major improvement."