The UK’s trade deficit in goods and services narrowed in November after the value of oil imports fell. The deficit – the difference between the amount imported and exported – was £3.2bn in November, down from £3.5bn from October, according to the Office for National Statistics (ONS).
The ONS put the narrowing deficit down to a £0.5bn fall in imports of oil during the month, to £2.2bn. The three-month figures also showed a narrowing in the trade deficit.
The deficit for the three months to November was £7.7bn, down £1.0bn from the previous quarter.
“Overall, a shocking October result means that, despite the improvement in November, net trade will probably subtract from GDP growth in Q4 again, although by less than in Q3,” said Scott Bowman, UK economist at Capital Economics.
“That said, the recent fallback in the oil price should help to improve the trade balance, all else equal, given that the UK is a net importer of oil.”
Drag on growth
Zach Witton from EEF, the manufacturers’ organisation, said the figures were not good news for his members because they were flattered by falling imports rather than growing exports.
“Exports are set to remain under pressure from weak demand flowing from slower growth in emerging markets, particularly China,” he said. “Yet stronger economic growth in the US and the eurozone should provide some support.”
The trade deficit is once of the factors cited by analysts as a drag on UK economic growth, which has been exacerbated by the strengthening pound over the past few years. A stronger pound makes UK exports more expensive for overseas customers.
Reducing the trade deficit so that the economy is less reliant on domestic demand is part of the government’s policy to rebalance the economy.
David Kern, chief economist at the British Chambers of Commerce, said: “Although worsening global headwinds are contributing to the UK’s excessive trade deficit, the broader message is that unless radical measures are taken to strengthen our export performance, our trade deficit will continue to be a threat to the country’s long-term economic performance.”