The UK trade deficit hits a post-crisis high despite a slight improvement in March
The UK's trade deficit narrowed slightly in March, but it was not enough to prevent the UK from clocking its largest shortfall for the first quarter of the year since before the economic crisis.
In March, the UK bought £3.8bn more goods and services from abroad than it sold to the rest of the world, a narrowing of the deficit by £0.5bn compared to February, the Office for National Statistics (ONS) confirmed.
Overseas sales in both goods and services edged up in March as exports climbed by 1.9 per cent – faster than the 0.6 per cent growth in the value of imports.
The UK has consistently run a trade deficit of billions of pounds in recent years.
Despite the slight improvement in March, disappointing export figures earlier in the year meant the deficit for the quarter – at £13.3bn – was the widest since 2008.
The UK's deficit with the rest of the European Union in the trade of goods widened by three per cent to £23.9bn between January and March, the largest on record according to the ONS.
"Overall, external demand doesn’t appear to be providing any support to the recovery and is compounding the domestic uncertainty created by the upcoming EU referendum," said Scott Bowman at Capital Economics.
Britain sells a considerable amount more in services – helped by the dominance of London's finance, legal and professional services firms – than it buys from the rest of the world.
Economists pointed to the fact that the trade deficit looks set to continued to be a drag on Britain's overall GDP growth, which came in at 0.4 per cent in the first quarter.
The EEF said although the picture for the first quarter as a whole was bleak, the improvement in March, which was stronger than expected, provides a good indication that the rest of the year could be a better one for UK exporters.
With services making up 79 per cent of the UK economy however, it is perhaps no surprise that the UK runs a substantial deficit in the trade of goods.
"The export picture looks rather better than that seen through much of last year, with a pick-up in goods exports to the gradually-recovering Eurozone. While the recent weakness of sterling may be providing some support for exporters it’s a more robust recovery in global trade, particularly in non-EU countries, that will help deliver a positive contribution to growth from trade," said Lee Hopley, chief economist at the manufacturers' organisation.