More signs UK economy is slowing as trade deficit grows
The UK trade deficit is growing despite the weak pound giving a minor boost to exports. And the data reflects just how significant the EU is as a trading partner with goods exported to non-EU countries falling.
A report published by the Office for National Statistics (ONS) shows the UK trade deficit nearly doubled between the last quarter of 2016 and the first quarter of 2017. The trade deficit grew by £5.7bn to £10.5bn in January to March 2017. Perhaps, more worryingly, there was a more dramatic gap in the trade deficit between February and March with imports from both EU and non-EU countries increasing by £2.9bn.
The ONS said the growing deficit was mainly due to “increased imports of machinery and transport equipment (mainly mechanical machinery and cars), oil and chemicals”.
Bloomberg reports that whereas net trade “drove the economy’s 0.7% expansion in the fourth quarter”, it has “acted as a significant brake on growth” in 2017 so far.
Exports to EU has grown whilst exports to non-EU countries has fallen
So despite a weak pound providing a boost to UK exports, it’s not anywhere enough to reduce the trade gap. Indeed, the ONS statistics show a rise in imports by 3.3% and a fall in exports by 0.5%.
The report also shows the value of goods exported to the EU grew by 5.7% whilst the value of goods exported to non-EU countries actually fell by 3.8. This is certainly a bad sign for a Global Britain outside of the EU – particularly if tariffs and non-tariff barriers are introduced with our biggest trading partner.
The significance of the EU for UK trade was further highlighted in two ONS charts showing the UK’s biggest import and export trading partners. For exports, EU countries make up seven of the UK’s top trading partners in the first quarter of 2017.
And in imports, EU countries account for seven of the UK’s top trading partners for the same period. Norway is also up there and although it’s not in the EU, it is in the single market through its EEA membership.
Here’s an insightful tweet on the report from the Financial Times’ Katie Martin:
So, we don’t HAVE to import all that stuff from the EU. But, er, we do. pic.twitter.com/zQwjy2e2vc
— Katie Martin (@katie_martin_fx) 11 May 2017
You can see the full report at ons.gov.uk.