UK trade deficit largest since 2008

The total trade balance saw slight improvement in March, but any changes have been marginal

The UK trade deficit in goods and services for the first quarter of 2016 stands at £13.3 billion, according to the Office for National Statistic (ONS). This marks a £1.1 billion increase from the previous quarter.

The deficit in the trade of goods saw an increase of £1.4 billion, to £34.7 billion. The ONS attributes this chiefly to a £1.9 billion rise in imports, £1.6 billion of which was from the purchase of machinery and transport equipment from abroad.

Out of this, the UK’s deficit in its trade of goods with the EU rose by £0.7 billion to a record-breaking high of £23.9 billion. This marked a 1.6% increase in exports from the UK to the EU, and a 2.3% rise in the import of goods from the EU to the UK. A rise in UK exports of chemicals to the EU helped to boost the export figure, but this was negated by a fall in the exports of fuels other than oil.

The UK’s total trade balance has seen slight improvement, but this has been marginal.

“In spite of the small improvement seen in March, the UK’s trade deficit worsened over the quarter and remains unacceptably large,” said the British Chambers of Commerce.

In contrast, the German trade surplus shot up to its highest level in March this year, according to the German counterpart of the ONS, Destatis. German exports rose by 1.9%, alongside a 2.3% fall in imports.

The news failed to move markets, as the combination of discouraging trade balance news from the UK and encouraging news from Germany still saw the pound sterling (GBP) strengthen against the euro (EUR) on the whole on Tuesday morning.

“The gains made by the German trade balance data were offset by knocks to euro (EUR) strength due to lacklustre French and German industrial production data out this morning,” says Carl Hasty, Director of international payments specialist Smart Currency Business.