Exporters call for more supporters as trade deficit widens

New figures from the ONS have shown the trade deficit has widened to its highest level since 2005 - although the reasons behind it aren't entirely straightforward.

by Emma Haslett
Last Updated: 25 Feb 2011
Given that the Government has been working its socks off trying to encourage overseas trade (remember David Cameron’s big trips to India and China last year?) new figures from the Office for National Statistics that show the trade deficit actually widened in December are going to be rather discouraging. According to the report, the trade deficit (the difference between our exports and imports), grew to £4.831bn in December – up from £3.947bn in November, putting it at its highest level since August 2005. Business groups are, naturally, disappointed – but with the bad weather hitting exporters hard, it might be a bit more complicated than all that.

The story for the whole of 2010 was disappointing, with the deficit growing to £46.2bn, up from £29.7bn in 2009. December’s figure was caused by a slight drop in exports, which dropped by 1.3%, as well as a 1.4% rise in imports. And it probably didn’t help that prices didn’t balance out, with export prices rising by 1.1%, while import prices jumped by 1.5% - although the price of oil played a role in that.

The news doesn’t exactly inspire confidence that the private sector is in the throes of recovery. As the British Chambers of Commerce has already pointed out, ‘a substantial increase in net exports will be a key component in any sustainable UK recovery’. But before we all start crying double-dip, it’s worth pointing out that the figures are slightly distorted: for one thing, a substantial part of the increase is made up of £652m worth of aircraft imports, which airlines snuck in before the VAT rise. For another, by grounding planes and preventing ships from leaving port, the bad weather was always going to have an impact on trade.

Still, the BCC says 70% of SMEs still haven’t dipped their toes in export waters, which means recovery is going to be slower. Many of those companies say they don’t feel they have the resources to get started, so more support for aspiring exporters is urgently needed, says the organisation. But while the good news is that the Government is due to release a Trade and Investment White Paper fairly soon, these figures might mean that it’s already too late.

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