News

UK trade deficit narrows to £1.2 billion

A “dramatic” narrowing in the trade deficit is set to boost the UK economy. A jump in exports helped Britain’s trade gap narrow to its smallest for a year, raising hopes that overall economic growth has rebounded from its slump at the start of 2015.

The trade deficit stood at £1.2 billion in April, down from £3.1 billion in March. Exports increased by £700 million, with most of the improvement coming from trade with countries outside the EU[1].

Howard Archer of IHS Global Insight said:

“The April trade data provides a significant boost to hopes that net trade will at the very least be much less of a drag on UK GDP growth in the second quarter – and could very well make a positive contribution to growth.”

Goods exporters were buoyed by a £0.4 billion rise in spending on UK chemicals, in particular organic compounds which the Office for National Statistics (ONS) suggested had been sold to the US. The large fall in goods imports was attributed to lower commodity prices during April, reducing the costs of items purchased by manufacturers[2].

The breakdown of where UK exports go continued to show strong reliance on the EU. Four of the UK’s top five export markets – US, Germany, Netherlands, France and Ireland – are EU members, noted Michael Saunders, economist at Citi bank. That would have a strong bearing on the debate around Britain’s possible break away from the EU depending on the outcome of an upcoming in/out referendum[3].

[1] Ferdinando Giugliano, Economics Correspondent, http://www.ft.com/
[2] Peter Spence, Economics Correspondent, The Telegraph
[3] Katie Allen, The Guardian