UK monthly trade deficit falls

September saw a marked improvement in Britain’s trade performance as higher exports and a smaller imports bill slashed the the monthly deficit to £2.7bn, down from £4.5bn in August. The news inspired hope that the economy may finally be returning to balance. The Office for National Statistics (ONS) said the UK racked up up a deficit of £8.4bn in trade in goods following a 1.1% increase in exports and a 3.9% decline in imports. This was set against a £5.7bn surplus in services, the same as in the previous month. City experts think the improved trade figures was in part responsible for the 1% of economic growth seen over the summer.

Tough winter for exports

Despite the good news, city analysts warned of a hard few months ahead. Howard Archer, UK economist at IHS Global Insight, said: “The prospects do not look great for a further positive contribution from net trade to GDP growth in the fourth quarter given the pressure on exports.” He believes this is because of an ongoing weak domestic demand in the eurozone and poor global growth.

Europe a hard sell

The trade deficit was in the main reduced by trade with countries outside the European Union. Exports to non-EU nations rose by £0.3bn while imports were cut by £0.7bn. The recession-hit markets of continental Europe were particularly hard to sell into, while exports to the other 26 EU nations were down by £0.1bn on the month, with imports decreasing by £0.6bn.