UK Exports Rise But Imports Match Pace To Growing Deficit

Whatever happened to the UK’s promised export boom? Well, exports are up and have reached record levels, but imports have also exceeded previous highs and a string of shockingly high deficits is roughly unchanged. We continue to import more than we export and are running a perpetual trade deficit.

The UK has offset its trade deficit with income from abroad for some time. The legacy of empire is still enjoyed by many companies and investors, who own assets in foreign lands and repatriate the gains to the UK.

This positive effect on our current account has waned sharply since the financial crash, however, and the future looks less rosy.

Stephen King, HSBC’s chief economist, is pained by the 5% deficit, which he argues should be down to zero or positive in the wake of a severe recession.

His concern is that deficits grow in times of plenty as shoppers consume ever more imported goods. Much better to start from a position of equilibrium or even a positive balance before the situation worsens.

A proper recession, one in which falling wages or mass unemploymentthat wipe out people’s incomes in aggregate, cuts the import bill dramatically. It is a situation we can see in Greece, Spain and Portugal, where the dire economic and financial situations they find themselves in have at least improved the trade balance.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza