Osborne to face calls to boost exports as UK trade deficit jumps to £2.6bn in January

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This Is Money Reporter

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The UK trade deficit leaped to £2.6billion in January from £700million in December, suggesting that a rebalancing towards export-led growth for Britain continues to remain a distant prospect.

The Office for National Statistics said exports of goods decreased by 4 per cent between December and January to £24.2billion, while imports increased by 3.4 per cent to £34billion.

The sharp rise in the gap between imports and exports comes as a blow to chancellor George Osborne, who is likely to face calls to boost exports and reduce the economy’s reliance on consumer spending as he unveils the annual Budget next Wednesday.

UK trade gap balloons to £2.6billion in January from £700million in December

However, there was brighter news from the construction sector, where output rose 1.8 per cent between December and January, mostly thanks to a 3.5 per cent surge in repair and maintenance work following January’s floods and storms.

Overall, it has been a mixed week for the UK economy after figures also showed a slowdown in growth across the industrial sector in January, which saw output rise by a paltry 0.1 per cent despite manufacturing enjoying its strongest rise in activity for nearly three years.

Experts cautioned January’s trade data was likely to be volatile due to erratic levels of imports for ships, aircraft and certain commodities, such as precious stones and silver. Imports of these goods leapt 57 per cent higher in January, according to the ONS, with the majority of the increase down to aircraft.

Andrew Goodwin, senior economic adviser to the EY ITEM Club, said this suggested the consumer recovery was not yet sucking in imports at a particularly rapid rate.

‘The less volatile three month-on three month data showed imports down by 3 per cent.’

He added: ‘Looking forward, recent survey data does point to an upturn in export growth. However, surveys of export orders have tended to represent a much brighter picture than the official data in recent months.

‘Overall, we think that the recovery is set to remain a largely domestic affair.’

Exports of goods decreased by 4 per cent between December and January to £24.2billion

Samuel Tombs, UK economist at consultancy Capital Economics, said despite the expected volatility, the underlying picture showed little improvement for the UK’s trade position.

He added the fall in exports was ‘perhaps an early sign that the stronger pound is starting to have an adverse effect on the UK’s economic recovery’.

‘With demand from the UK’s main trading partners in the eurozone unlikely to rise significantly soon, we continue to think that the UK’s economic recovery will receive little in the way of support from the external sector this year,’ he cautioned.

The trade gap widened as a £9.8billion deficit on goods offset a £7.2billion surplus on services in January.

The British Chambers of Commerce (BCC) said the long-term picture was more encouraging, with a fall in the deficit over 2013 as a whole.

David Kern, chief economist at the BCC, said: ‘Nevertheless, the pace of the UK’s rebalancing towards net exports is far too slow, and if this continues we risk missing out on the Prime Minister’s target of exports reaching £1trillion by 2020.’

The ONS also slashed its estimation for construction activity in the fourth quarter of 2014, revising it down to a fall of 0.2 per cent from a rise of 0.2 per cent.

But it said the move would not have an impact on overall gross domestic product growth data for final three months of last year, when the economy grew by 0.7 per cent.

Comments (7)

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Roger,

Rostock, Germany,

1 day ago

So the only bright side was we had flooding which needed money spent.

The debt mountain continues

the truth,

wrexham, United Kingdom,

1 day ago

that chart looks like the uk economy is due another boom , need to get on the phone to bank of england , more funny money needed and lots of it , run more housing articles .

themajoritynottheminority,

Manchester,

1 day ago

real ale?

cannabis=hemp oil, clothing. .

quite clearly we need quality products for the world to require.

Paul,

London, United Kingdom,

1 day ago

MS used to get about 95% their goods from the UK, as they went over seas for larger profits the standards went down and imports up.

rob boberts,

worcester.,

1 day ago

As the economy is not yet rebalanced (because of 13 years of the prime mentalist Broon and his maniac policies) and won’t be for another 5 years, any upturn is going to suck in imports. It’s unavoidable. Rebalancing back towards in manufacturing away from “Broons bankers” will cure the problem. However if the socialist loons were to win the next election……………………

Paul,

London, United Kingdom,

1 day ago

Mrs T sold and closed down exports jobs in the 80s with her love for oil and US bankers. We had a strong £ because of the oil exports, rather than invest in a wealth fund.

PrivateSi,

WORCS,

1 day ago

Is this not just a Christmas Blip – we import many Far East++ goods over Christmas whilst our main exports are less seasonal…? I don’t expect us to have more coming in than going out the way the world is but it would be good if we could get there again..

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Osborne to face calls to boost exports as UK trade deficit jumps to £2.6bn in January