Trade deficit ‘better than expected’

BUSINESS leaders have welcomed new trade deficit figures despite a widening of the gap.

The overall trade gap widened to £1.8bn in January, up from £1.2bn in December, but the figure was better than expected.

The deficit in goods increased from £7.2bn to £7.8bn while the surplus in services decreased from £6bn to £5.8bn.

David Kern, chief economist at the British Chambers of Commerce, said: “Taking monthly fluctuations into account, the figures confirm a steady improvement in Britain’s trading position, although progress is not as strong as it should be. Exports are growing more quickly than imports, and it is reassuring that the economy is gradually rebalancing.

“With the Government’s tough deficit-cutting measures taking effect, any sustained UK recovery must rely on increased exports, business investment and replacing imports with domestically manufactured goods. While low interest rates and a competitive pound will continue to help British exporters, the government must do more to help British firms compete on equitable terms.”

Car exports to non-EU countries including the US, Russia and China were one of the month’s major successes but these gains were offset by lower exports of chemicals and consumer goods.

Mark Gregory, chief economist at Ernst & Young, said: “Looking ahead, downside risks dominate the outlook. The Eurozone crisis continues to cast a shadow on short-term prospects as any escalation of the crisis will hit demand in the UK’s main export markets in Europe.

“It’s more important than ever that UK exporters move away from their traditional trading partners and tap into faster growing emerging nations.”