Bloomberg News

U.K. Trade Deficit Narrows as Exports Increase to Record

October 13, 2011

(Updates with pound in fifth paragraph.)

Oct. 13 (Bloomberg) -- The U.K. trade deficit on goods narrowed in August as exports rose to a record and imports declined.

The goods-trade gap shrank to 7.77 billion pounds ($12.2 billion) from 8.15 billion pounds in July, the Office for National Statistics said today in London. The previous month’s deficit was revised from an initially reported 8.92 billion pounds as the statistics office implemented methodology changes to the data. Exports rose 0.6 percent to 25.5 billion pounds, the highest since current records began in 1998.

The Bank of England restarted asset purchases last week amid threats to the economy and the financial system from the debt turmoil in Europe, Britain’s biggest trading partner. A British Chambers of Commerce survey this week showed measures of export sales and orders at manufacturers and services companies dropped to their lowest since 2009 in the third quarter.

“Following a good start to the year, the trade performance is being pressurized by markedly slowing global growth,” Howard Archer, chief European and U.K. economist at IHS Global Insight in London, said before the data were released. “This is countering the support to exports coming from a competitive pound. U.K. exports are particularly vulnerable to weaker euro- zone economic activity.”

The pound was little changed against the dollar after the data were published. It traded at $1.5697 as of 9:33 a.m. in London from $1.5752 yesterday.

Exports Increase

The increase in goods exports in August was led by fuels, intermediate goods such as mechanical engineering products and foreign sales of food and drink. Manufacturers have benefited from the pound’s decline of about 24 percent on a trade-weighted basis since the start of 2007. Goods imports fell 0.7 percent to 33.3 billion pounds on the month, the statistics office said.

The deficit on goods and services narrowed to 1.88 billion pounds in August from 2.27 billion pounds in July as exports in that category rose to the highest since 1998. In services alone, there was a surplus of 5.9 billion pounds.

The statistics office changed the methodology for the trade data in line with its new Blue Book and revisions to quarterly national accounts, it said today. This affected the seasonal adjustment and resulted in the categorization of some products being changed.

Bank of England Deputy Governor Charles Bean said the central bank “could well decide” to expand asset purchases further, the Guardian newspaper reported today, citing an interview. Bean said there has been “a noticeable deceleration in activity indicators not just in this country, but across the globe.”

“The hope was that we would be expanding our net trade, exports would be growing,” former Bank of England policy maker Charles Goodhart said in a Bloomberg Television interview yesterday. “The problems in Europe and the U.S. have been worsening so much that the net trade is not likely to be as buoyant to lift us as we would have hoped.”

--With assistance from Mark Evans and Harumi Ichikura in London. Editors: Fergal O’Brien, Eddie Buckle.

To contact the reporter on this story: Scott Hamilton in London at

To contact the editor responsible for this story: Craig Stirling at

The Good Business Issue
blog comments powered by Disqus