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UK trade deficit narrows to seven-month low

Britain’s trade deficit narrowed to a seven-month low in October, as the country imported less oil and exports climbed, including silver to India.

The trade deficit in goods dropped to £2bn in October from £2.8bn in September, the lowest since March. The Office for National Statistics said exports rose by £200m between September and October to £24.3bn, mainly owing to higher exports of erratic items, notably silver.

Imports fell by £700m in October, driven by lower oil imports from countries outside the EU, returning to more normal levels after September’s high, the ONS said.

North Sea oil platforms came back online, reducing oil imports, while lower oil prices might also have helped, noted Rob Wood, chief UK economist at Berenberg. He added: “There will be more to come on that score. The UK is a net oil importer, so weaker prices for the black gold should improve the UK’s trade balance.”

In the three months to October, the trade deficit narrowed by £1.2bn to £30.3bn, with exports down 0.9%, marking an easing in the rate of decline. City economists noted that the weak eurozone recovery is holding back British exports, compounded by a 12% strengthening in the value of sterling from the lows seen last year, although it has stabilised in recent weeks. A 7.8% fall in sales of cars overseas between September and October also impacted on the figures, but may turn out to be a one-off. Chris Williamson, chief economist at Markit, said: “We don’t have to look far for the reason why exports are in decline. Most evident is the near-stagnation of economic growth in the eurozone, alongside a similar near-stalling of growth across the emerging markets. The hope is that, with ECB [European Central Bank] stimulus acting as a tailwind, economic growth should pick up in the eurozone in 2015, boosting demand for UK exports.” Wood was also optimistic, saying: “Weakness in the eurozone is dragging a little on the otherwise strong UK recovery, but we should soon pass the worst with Germany, the epicentre of the recent eurozone slowing, showing signs of perking up a little recently. “Fading geopolitical tensions should help UK trade in the coming months. We expect eurozone growth to gradually return to trend by the middle of next year, helping UK trade pick up again and, along with all the extra stimulus in the pipeline from cheap oil, cheap food and cheaper money, allowing UK growth to accelerate again.”

The Guardian
Published on:
December 10, 2014
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