UK traded goods deficit with EU hits record high but overall deficit narrows slightly

Britain's deficit on trade in goods and services narrowed slightly but the UK suffered a record deficit with European Union countries in February, official figures released on Friday (8 April) showed.

According to the Office for National Statistics (ONS), the deficit with the EU stood at a record £8.6bn in January as exports to the 28-country bloc rose 4% and imports from the EU rose 6.7%. Exports of traded goods to the EU were still down by 1.3% in the three months to February compared to the three months to November, while imports of traded goods from the EU were up by 1.1% in the three months to February compared to the three months to November.

"UK exports have struggled in recent months, as they have clearly been hampered by sterling's overall strength in 2015 – particularly against the euro – and moderate global demand," said Howard Archer, chief UK and European economist at IHS Global Insight. "While sterling has weakened appreciably so far in 2016, it will take time for this to feed through to boost exports. Furthermore, global growth has remained lacklustre."

The figures are particularly significant as they come only two months ahead of Britain's EU referendum on 23 June. A number of high profile business figures and business organisations have come out in support of the 'remain' campaign, indicating British businesses would suffer from a Brexit, while others maintain Britain would benefit from leaving the 28-country bloc.

Britain's deficit on trade in goods and services fell to £4.8bn ($6.7bn, €5.9bn) in January from a sharply upwardly revised £5.2bn in the previous month. The deficit in goods alone shrank from £10.5bn in December 2015 to £10.3bn in January. The total trade deficit figure, however, remained above the average monthly shortfall of £3.1bn recorded in 2015.

Amid a set of disappointing trade figures, total exports provided some solace as they rose 0.9% month-on-month with exports of traded goods excluding oil up 1.4%. In volume terms, exports of traded goods rose 1.9% month-on-month in February.

However, the underlying trend in exports remained soft as total exports of goods and services were still down by 1.7% in the three months to February compared to the previous quarter. In volume terms, exports of traded goods were down by 1.9% in the three months to February compared to the three months to November.