Britain imported £3.6bn more in goods and services than it exported in the month of October according to the Office for National Statistics, a massive increase on the £2.5bn difference the previous month.
The gap widened mainly because of goods, where we imported £9.5bn more than we exported. This is a £1bn increase on the trade gap for goods specifically – which is huge – but it was offset by a £5.9bn services surplus for the period.
The figures are a worry for the chancellor, George Osborne, whose Autumn Statement yesterday is already seen by many as too weak a plan. In his speech, Osborne revealed a new fund of £1.5bn for finance guarantees to help exporters, but if the imbalance is so heavily ingrained, it does not bode well for growth next year.
And whilst October’s is a particularly notable trade deficit, the averages across the year are more worrying. In 2011 the goods deficit was running at £8.4bn per month, but for 2012 this figure has increased to £8.9bn. So much for all the talk of an export-led recovery.
The news is particularly disappointing for the chancellor because he has also just faced downbeat forecasts from the Office for Budget Responsibility. It reckons that the UK economy will contract by 0.1% in 2012, and grow by a piffling 1.2% next year.
The predictions are a bit of a step down from the OBR’s original forecast: it thinks that the economy will be 3.1% smaller in 2016 than it had originally estimated. Add to that the promise of austerity continuing until 2018 (which Osborne revealed yesterday), and that’s a real ‘glass half empty’ plight.
Still, the worst may over. The eurozone is still the key source of weakness, and has offset rising sales to the US and China – UK exports to those two regions have increased by 5% year on year. This suggests that the depressed European market is more to blame for the trade gap than the UK being ‘bad’ at exporting.
Still, we could do with Europe shaking off its economic lethargy, pronto.