By Max Clarke
UK's trade in goods reached record levels of £8.7 billion for November 2010- up from £8.5 billion in October. Of this figure, some £3.7 billion was traded with the EU.
Trade in services for the same month stood at an estimated surplus of £4.6 billion- unchanged from the previous month; making a cumulative deficit in goods and services of £4.1 billion. News of the widening deficit comes at a time when UK exports have been increasing at rates unseen since the recession.
Commenting on the trade figures for November published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“These figures are mixed with a slight increase in the overall size of the trade deficit. But the underlying trends are positive, with the volume of exports rising at a faster rate than the volume of imports in November.
Iain MacDonald, Head of Trade Product at Barclays Corporate also offered analysis, saying:
"Despite a slight widening of the trade deficit, a recent wave of positive exporting data should offer some cheer to a Government that has placed such a major focus on the success of UK exporters.
"Encouragingly we have seen a recent increase in the number of SMEs seeking export finance, although this is often because these mid-market businesses feel they can simply no longer rely on the UK for growth.
“Longer-term comparisons show satisfactory growth in exports, but the pace of recovery is still not strong enough. The impressive recovery in manufacturing output that we have seen over the past year has not yet been reflected in a major improvement in international trade. Since the Government’s austerity measures will inevitably dampen domestic demand, a substantial boost in exports is a key component in any UK recovery.
“The Government must ensure that British exporters do not face competitive disadvantages in key areas such as short-term trade finance. On their part, Trade exporters must reinforce their efforts to move into fast-growing emerging economies such as India and China. It is risky for the UK to rely excessively on the Eurozone given the problems it faces as a result of the sovereign debt crisis.”
Mirroring the BCC's unwillingness for the UK to rely on the EU for export trade, Mr. MacDonald added:
"While it is positive that many smaller companies are taking up the export mantle, their focus is primarily on Europe, which is still forecast for relatively low growth, again missing opportunities in developing economies.
"With almost half of all exports bound for Europe, a major issue for exporters in 2011 is the widely forecast appreciation in sterling, both against the Euro and the US dollar. However, ongoing sterling weakness has not offered the major boost that many economists had hoped for over the past two years, so on balance the impacts of appreciation could also be muted.
"Anecdotal evidence suggests rising imports in electrical goods and homeware, particularly ahead of the rise in VAT, were in part fuelled by a consumer trend of preparing for a tough 2011 by stocking up on items that will enhance the stay-at-home experience.