Fall in pound doing more harm than good as UK trade deficit widens
Latest figures show the UK’s trade deficit widened again with a fall in exports to non-EU countries as the main contributor.
The UK economy has suffered another setback with the latest figures showing the trade deficit widened by £0.4bn to £8.6bn between the three months to April 2017 and the three months to July 2017. The report by the Office for National Statistics (ONS) said this was primarily due to a fall in exports to non-EU countries where the trade deficit in goods widened by £2.4bn. And whilst the trade deficit narrowed with the EU, it was not enough to offset the trade deficit with non-EU countries.
As well as highlighting the value of the UK’s trading relationship with the EU, the report also suggests the weakened pound is doing little to boost Britain’s exports.
Comparing UK trade with the EU and UK trade with non-EU countries
Chukka Umunna, Labour MP and supporter of Open Britain, who campaign for staying in the single market, said today’s report shows “Britain’s trade deficit remains stubbornly high” despite Brexiteers claims the weakened pound would lead to a “major boost in British exports”. On the narrowing of the trade deficit with the EU, Umunna said this “serves to underline how crucial full membership of the single market is to British jobs and economy”.
A chink of light in today’s figures is that Britain’s deficit in goods trade with other EU countries has narrowed. But this just serves to underline how crucial full membership of the Single Market is to British jobs and the economy.
Chukka Umunna, Labour MP and supporter of Open Britain
Business body warns a sudden exit from the EU would “trigger a far more marked weakening in economic conditions”
The news of the UK’s widening trade deficit comes as the British Chambers of Commerce (BCC) published its latest forecast for UK growth, downgrading its medium-term outlook for the next few years. The BCC cut its growth expectations for 2018 from 1.3% to 1.2% and for 2019 from 1.5% to 1.4%. However, it upgraded its forecast for this year from 1.5% to 1.6%.
The BCC said that whilst there was a moderately stronger outlook for consumer spending growth in 2017, inflation is still expected to outpace real wages, which would weigh on consumer spending in future years. The downgrade to its 2019 forecast also reflects BCC’s expectation that net trade and weaker investment would lead to a lower contribution to GDP growth.
BCC director general Dr Adam Marshall said: “the rising upfront cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of sterling”. He further said “a comprehensive Brexit transition deal, and a swift shift to focus on the future UK-EU trade relationship, are needed the autumn” as well as an Autumn Budget that supports business growth.
And in comments that neatly summarise today’s trade figures, BCC’s head of economics Suren Thiru said “it is increasingly clear that the post-EU referendum slide in the value of sterling has done more harm than good”. Thiru noted the BCC’s forecasts were based on a “relatively smooth exit from the EU” and he warned “a more sudden departure would be likely to trigger a far more marked weakening in economic conditions”.