Total UK trade deficit narrows in 3rd quarter

LONDON • Britain's trade deficit with the rest of the world narrowed in the three months to September, offering a boost to third-quarter growth, after a hefty fall in sterling following the country's vote to leave the European Union.

But the trade deficit in goods heavily overshot economists' expectations in September alone, driven in part by a record deficit with the EU, and the Office for National Statistics (ONS) said there was little direct evidence so far of currency effects on trade.

The office said Britain's total trade deficit narrowed to £11 billion (S$19 billion) in the third quarter from £12.7 billion in the April-June period, which was the highest since the end of 2013.

The deficit in goods alone narrowed to £33.2 billion in the third quarter, but for September it widened to £12.7 billion.

Britain's currency lost more than 10 per cent against the US dollar and the euro after June's referendum, hitting a 31-year low against the greenback, and lost further ground last month to hit its weakest-ever level against a basket of major currencies.

Many manufacturers have reported a jump in foreign demand after the currency fell, but it can take time for this to show up in trade data. Higher costs for imports are often felt first when a country's currency falls, causing the trade deficit to widen temporarily before narrowing.

"So far, there is little evidence in the data of the lower pound feeding through into trade volume or prices," ONS statistician Hannah Finselbach said.

In the medium term, there is also uncertainty about how much access firms will have to EU goods and services markets after it leaves the bloc.

Some supporters of Britain leaving the EU have said the country's large trade deficit with the bloc will help ensure a favourable deal.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 10, 2016, with the headline 'Total UK trade deficit narrows in 3rd quarter'. Print Edition | Subscribe