In the past the UK's balance of payments has been buffeted by wars and, more recently, the price of oil. Now, though still slightly in the red, it is relatively stable.
One of the earliest definitions of the balance of payments appeared in 1668 in Sir Joseph Childe's A New Discourse on Trade. Three centuries later his description still holds as both accurate and admirably concise: 'Something whereby it is known whether this kingdom gaines or loses by foreign trade'.
International trade has existed for as long as the British have been seafarers. Roman rule aside, however, its impact was relatively slight until the end of the Middle Ages. It was not until the 17th century that foreign trade came to the public's notice. Pundits proliferated, among them the novelist and pamphleteer, Daniel Defoe, who lambasted restrictive French practices and concluded that 'no trade was better than a destructive one'.
Trade - and, with it, the balance of payments - appears to have been strong throughout the 18th century, though widespread smuggling and poor records make certainty impossible. The American War of Independence caused a slow-down in the late 18th century, after which trade picked up again, before stagnating during and after the Napoleonic Wars. By the mid-19th century, foreign trade had recovered spectacularly and the UK ran a healthy balance-of-payments surplus for most of the next 100 years. Indeed, from 1830 until 1914, the current account dipped into the red only twice.
More surprisingly, the UK has run a visible deficit since records began. This, however, has generally been more than offset by the invisible surplus and income earned on overseas assets. Thus the graph shows a long upwards trend from the 19th to the early 20th century, reflecting the UK's position at the time as the world's trade and services centre.
The quickest way to wipe out a favourable balance, it seems, is to fight an expensive war. While this effect is evident in the Crimean and Boer Wars, it wasn't until the capital-intensive conflicts of the 20th century that the potential of war to damage trade really made itself felt. The first world war plunged the balance into deficit for the first time in nearly 70 years. The second world war was to change the balance forever. To finance its ruinous cost, Britain liquidated overseas assets and borrowed heavily from abroad throughout the 1940s, resulting in a massive reduction in overseas income. This precipitated a long post-war decline into deficit by the late 1960s. The early 1970s saw a short-lived recovery, which was very quickly scuppered by the OPEC decision to restrict oil supplies.
From this point onwards, the current account has been closely linked to oil. In the early 1980s it climbed sharply into the black on the back of Britain's North Sea exports. However, oil was not the economic panacea that many had hailed it: though in some senses a lifeline, it also spawned the vastly overvalued 'petropound', which dealt a severe blow to other export sectors. When oil prices collapsed in 1985, the effect - further exacerbated by the booming economy and its insatiable appetite for imports - was traumatic. The Gulf War's effect on crude prices offered some respite, but real improvement only came with recession.
The present economic recovery - as we are constantly reminded - is export-led, aided by a pound weakened by lower oil prices. The result is that the balance of payments, now less vulnerable to the vagaries of petroleum prices, is more stable than it has been for two decades. Though still slightly in the red, the next few years could well see the UK's ledger back in the black. And this time it should owe its colour to something other than oil.