UK recovery hopes dealt double blow from figures

Brian McQuade: Optimistic. Picture: Contributed

Nida Ali, economic adviser to the EY Item Club, said the official figures were “a stark reminder of how unbalanced the recovery still is”, providing hard evidence that growth is largely domestically driven.

According to the Office for National Statistics (ONS), the UK goods trade deficit widened in September by some £200 million to £9.8 billion on the month before.

Exports of goods to the European Union decreased by £300m to £12.6bn, while imports from the region increased by £400m to £18.6bn, producing a record deficit of £6bn.

Separate figures showed construction output fell by 0.9 per cent month-on-month. It meant a previous estimate for impressive growth of 2.5 per cent over its third quarter was revised sharply down to 1.7 per cent.

Britain’s economy has staged a surprisingly robust recovery this year mainly driven by domestic spending, frustrating the coalition’s plan to rebalance the economy away from its reliance on consumers.

The weak trade performance contrasts with Germany’s surplus which hit a record high in September as exports climbed across the board. The setback for construction comes despite signs of improvement in the housing market and government initiatives such as the Help to Buy mortgage scheme. The latest figures mean the sector remains 13.3 per cent off its pre-recession peak.

Its decline in September included falls in new housing work from public corporations and infrastructure while private sector house building fell flat.

The ONS stressed the quarterly upturn in the sector of 1.7 per cent was still its highest third-quarter growth since 2003 – and the downward revision would not have an effect on the overall estimate for 0.8 per cent GDP growth over the period.

In the three months, private housing and commercial work increased strongly but infrastructure fell.

Howard Archer, chief economist at IHS Global Insight, said housebuilding was still showing strength amid surging demand. But he added: “Even so, there needs to be sustained, major growth in house-building activity if the housing shortage problem is to be properly addressed.”

The head of Kier Construction in Scotland and the north-east of England, Brian McQuade, added: “The overall UK picture shows a steady increase, and there is a continued but cautious optimism within the whole construction industry.”

The UK economy grew by 0.8 per cent in the third quarter, compared with the previous three months, according to a preliminary estimate. The ONS is due to release revised GDP figures on 27 November.