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UK trade deficit biggest since 2008

Do Not UseDo Not Use 10/05/2016
Container ship heading to China © Reuters Container ship heading to China

The UK's trade deficit for the first quarter is at its biggest since 2008.

GDP graph © BBC GDP graph

The gap between imports and exports for the first three months of 2016 stands at £13.3bn, up from £12.2bn in the fourth quarter of 2015, says the Office for National Statistics (ONS).

Analysts said this was more evidence of the weight of global economic weakness on the UK. One described the figures as "truly horrible"

UK economic growth has already slowed to 0.4% in the first quarter.

The ONS said the UK trade gap widened over the quarter because of a £1.9bn rise in imports such as mechanical machinery, cars, clothing, jewellery and footwear.

Meanwhile, exports increased by just £500m, led by chemical products.

"A truly horrible first-quarter trade performance that clearly weighed down on GDP growth," said Howard Archer from IHS Global Insight.

He added that UK exports had been hampered by moderate global demand as well as sterling's strength in 2015, particularly against the euro.

"The hope has to be that UK exporters will increasingly be helped by the overall marked weakening of the pound in 2016, although the pound has climbed off its April lows," he continued.

'Unacceptably large'

Within this period, there was a slight improvement in March's numbers, with the deficit narrowing by £0.5bn to £3.8bn.

But the British Chambers of Commerce, a business group, said this was little cause for comfort.

"In spite of the small improvement seen in March, the UK's trade deficit worsened over the quarter and remains unacceptably large," the group said.

Last month, figures showed that economic growth in the UK had been hit by a drop in manufacturing and construction output.

Last week, the closely watched Purchasing Managers' Index (PMI) added to those concerns by indicating that UK growth was "near stalling".

Chris Williamson from Markit, which compiles the PMI reports, said: "The weakness of exports is by no means severe but is just one of many headwinds acting against the UK economy at the moment, compounding growing uncertainty at home due to referendum worries."

German surplus

Meanwhile, Germany's trade surplus hit an all-time high in March as its exports surged, according to monthly data published by the federal statistics office Destatis.

Exports grew 1.9% while imports fell 2.3%, pushing the surplus to €23.7bn from €20bn in February.

On the negative side, industrial output contracted in March, suggesting that overall economic growth in Germany could be beginning to slow.

However, looking forward, economists at Capital Economics predicted that global growth would pick up, which would in turn boost demand for UK goods.

"But for now, the responsibility for driving the recovery lies with the domestic services sector," the note added.

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