Trade figures trigger export help call
THE deficit in UK trade remained stuck at £4.5bn in July, according to new figures.
Analysts warned the disappointing figures suggested trade will act as a drag on UK growth in the third quarter of the year.
There were also fresh calls for the Government to do more to help UK businesses export.
Nida Ali, economic advisor to the Ernst & Young ITEM Club, said: “The trade data continues to disappoint – if there are similar deficits in August and September then there is a good chance that the Q3 deficit will break the record set in Q4 last year. This is particularly concerning, in the context of the increased dependence on exports to boost growth and the long-held desire to rebalance the economy.
“Although export volumes in July were well above the Q2 average, they were offset by even stronger growth in imports. The only cause for optimism is that higher imports of capital and intermediate goods is usually a sign that the economy has a degree of underlying strength. The trade data has been unusually volatile of late, mainly because of one-off factors such as the extra Bank holiday and the Japanese tsunami, but allowing for these it’s apparent that export volumes have done little more than move sideways since the end of last year
“A continuation of these trends is likely to be detrimental for the economy as a whole and implies that net trade will once again be a drag on overall growth in Q3. With the global growth outlook having weakened significantly in the past couple of months and the surveys already reporting a more subdued orders pipeline, there could be a tough winter in prospect for UK exporters.”
Exports grew by 2% in July but this was offset by imports growing 3.8%. The export prices of goods fell by 0.7% but import prices rose by 1.3%.
David Kern, chief economist at the British Chambers of Commerce, said: “These figures were slightly disappointing as most analysts expected a modest narrowing in the trade deficit. While exports have increased in July, imports have risen even faster, making it clear that the much-needed rebalancing of the UK economy towards net exports is not happening quickly enough.
“The growing problems facing the global economy, particularly the eurozone, presents UK exporters with major challenges. With the austerity measures in full swing, it is clear that net exports will have to be the main engine of Britain’s economic recovery. With this in mind, it is time for the Government to back a national export drive. Unless we accelerate the pace at which exports increase, it will be difficult to sustain UK growth.
“The Government must focus on backing small- and medium-sized firms in key areas such as trade finance, insurance and promotion. While a competitive exchange rate and low interest rates will help UK exporters, additional efforts are needed to ensure that UK businesses can compete on equitable terms with overseas businesses.”
