Britain’s goods trade gap with the rest of the world grew to record levels in November as the global economic downturn pummeled demand for UK exports beyond the EU, despite a big fall in the value of the pound.
A slump in exports to the United States made up half of the drop in demand for British goods abroad, as the trade deficit with non-European Union countries rose to its highest level since the data series began in 1998.
The Office for National Statistics said that Britain’s goods trade gap with the rest of the world widened to 8.330 billion pounds ($12.46 billion) in November from 7.631 billion in October, the biggest since records began in 1697.
Economists had forecast a deficit of 7.5 billion pounds.
The goods trade gap with non-European Union countries jumped to 5.304 billion pounds from 4.437 billion in October.
Sterling fell against the dollar after the figures added to evidence of a worsening economic outlook.
“One thing is for sure, the UK can’t rely on the global economy or the fall in the pound to drag it out of its deepest recession since the early 1980s,” said Paul Dales, an economist at Capital Economics.
The deteriorating trade balance adds to a plethora of factors dragging Britain’s economy further into the red in the final quarter of last year.
Policymakers and analysts expect official GDP figures next Friday to confirm Britain is in its first recession since the early 1990s and there are fears that the downturn could prove to be severe and prolonged.
After a decline in GDP of 0.6% in the third quarter of 2008, the National Institute of Economic and Social Research estimates the economy shrank 1.5% in the final quarter—which would be the sharpest drop since 1980.
The Bank of England, which has slashed interest rates to 1.5% from 5.0% since October, had been hoping that a weaker pound would support British exports and rebalance the economy away from its dependence on domestic consumption.
There has been little evidence so far of any boost, although economists say there is a lag between a fall in the value of the currency and any benefits to the trade balance.
November’s export figures make for particularly grim reading. Total exports fell 6% and, while exports to Britain’s main trading partner—the EU—were virtually unchanged on the month, exports to the rest of the world tumbled 12.5%.
Exports to the United States fell 645 million pounds—around half of the overall fall in exports.
“You have to remember that these are volatile figures and it will take a while for the effect of sterling’s depreciation to come through,” said George Buckley, an economist at Deutsche Bank. “Nevertheless, it’s hard to see how Britain’s export performance can improve when its trading partners are suffering so much.”
Economists have been treating British trade data with caution in recent years due to the effects of import-export sales tax fraud within the European Union, but the ONS says that the effect is now greatly reduced. (Reuters)