A fall in exports has seen the UK’s trade gap widen, new data shows – so what can the country do to turn it around?
Trade has been an important part of the UK government’s strategy for growth since the financial crisis. Much of the rhetoric coming from Whitehall has focused on measures to rebalance the economy as it recovers, so that the UK emerges as a nation which sells more to foreign markets than it buys from them.
So chancellor George Osborne will undoubtedly be disappointed that a fall in exports has led to growth in the UK’s already wide trade deficit.
Data from the Office for National Statistics (ONS) shows that the nation’s overall trade deficit stood at £2.6 billion in January – a sharp rise from just £0.7 billion in December. Exports slipped by four per cent, while imports rose 1.7 per cent. As might have been expected, the trade figures were largely supported by the services sector, since the deficit in goods specifically rose from £7.7 billion to £9.8 billion at the same time.
Some volatility is usually expected when it comes to UK trade, but especially in the last few years, the gap between how much is sold and bought in from abroad has simply refused to shrink. In fact, imports have outstripped exports to the tune of anywhere from £7 billion to £10 billion for around the past four years, as the Financial Times points out.
The Bank of England’s monetary policy which has kept the value of the pound quite low was hoped to encourage exports by increasing the spending power of foreign buyers in Britain, but this and the government’s other efforts to boost overseas trade don’t appear to be bearing the fruit the government had anticipated.
Some of the UK’s major markets are still struggling. As this infographic from Management Today shows, UK goods and services are shipped around the world, but the majority of trade still goes to countries around the EU.
Perhaps sluggish demand within the eurozone is contributing to a lack of demand, but with the improving US and European powerhouse Germany as Britain’s two biggest customers, it stands to reason that trade could still be higher.
It’s obvious the government will need to introduce some new measures to reassure British businesses and make it easier for them to access finance to grow in foreign markets. All eyes are now on Mr Osborne, who has said he will launch further plans to encourage businesses in next week’s Budget.
As the Chancellor readies to present the UK Budget 2014 this week, what are your expectations for it?
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