Record trade deficit for UK
Gap between imports and exports hit £14bn in three months to September
Larry Elliott, economics editor
guardian.co.uk, Tuesday 9 November 2010 10.31 GMT
Cargo containers at Felixstowe. The trade gap in goods alone edged above £25bn for the first time
between July and September. Photograph: David Levene for the Guardian
Government hopes that economic recovery will be spearheaded by manufacturing and exports took a dent
today as official figures showed the UK running a record trade deficit in the three months to September.
Data from the Office for National Statistics revealed that the gap between exports and imports in the third
quarter widened to more than £14bn – despite the boost provided by a weak pound.
The ONS said the trade gap in goods alone edged above £25bn for the first time between July and
September, but was offset by a healthy surplus in trade in services.
In September, the ONS recorded a slight improvement in the UK's trade performance. Imports into
Britain of £30.6bn topped exports of £22.4bn by £8.2bn, slightly below the £8.5bn shortfall recorded for
August. A £3.6bn surplus in services meant the overall trade gap narrowed from £4.9bn to £4.6bn.
Separate ONS figures showed that the output of UK factories rose by 0.1% in September – slightly below
City expectations and the weakest performance since April.
Over the three months to September – considered a better guide to the underlying trend – manufacturing
output was up by 1% and was 5.3% higher than in the three months to September 2009.
Industrial production – which includes output from mining, North Sea installations and the energy sector
– rose by 0.4% between August and September, in line with market forecasts.
Hetal Mehta, UK economist at Daiwa Capital Markets, said: "With manufacturing output growth slowing
it seems the recovery is beginning to falter. The manufacturing sector will struggle to contribute much to
GDP growth unless global demand and exports pick up strongly, which is looking highly unlikely in the
near term."
1. Define the following terms indicated in bold print in the text.
a. Weak pound
b. Trade in services. [4]
2. Using a diagram to illustrate , explain why the British pound would weaken. [4]
3. Explain why the author of the article points out that Britains trade deficit has widened,
despite the weakening of the British pound. [4]
4. Using the information contained in the text and your own knowledge of economics, evaluate
the view that British economic recovery will continue only if there are changes in domestic
economic conditions.
[8]
Balance of Payments
Current account deficit reduced
Euros to 1 GBP
latest (Nov 8) lowest (Oct 25) highest (Jun 29)
120 days
1.15915 1.12039 1.23396
graph
British Pounds to 1 USD
latest (Nov 8) lowest (Nov 4) highest (May 25)
120 days
0.619889 0.61489 0.697087