Pound falls as UK trade deficit widens yet again, thanks to rising oil prices and shrinking exports to the EU

Lucy White
A long line of lorries are pictured park
Non-EU imports rose as EU exports shrank (Source: Getty)

The UK's trade deficit, or how much its imports are exceeding its exports, widened again in the three months to December 2017, as exports to the EU shrank.

Total UK trade deficit, including goods and services, widened by £3.8bn to £10.8bn according to statistics from the Office for National Statistics (ONS). Excluding erratic commodities, such as oil and gold, the deficit widened by £1.5 billion to £9.0 billion.

According to the ONS, the widening of the deficit was mainly (£3.3 billion) due to trade in goods. Rising oil prices, a 3.8 per cent increase in imports from non-EU countries, and a decrease in exports to the EU, all helped to increase the gap.

Read more: British manufacturing growth continues to new post-financial crisis high

“Although there was a surprise pick-up in construction output, the sector remains a concern and together with the widening in the UK’s trade deficit and weakening industrial output indicates that economic conditions are becoming more sluggish," said Suren Thiru, head of economics at the British Chambers of Commerce.

As we move through the Brexit process more needs to be done to provide clarity on what the future trading relationship with the EU will look like.

The UK has generally run a surplus in trade of services, as it exports more in services than it imports. Yet this surplus narrowed by £0.5bn in the three months to December.

The pound, which had been climbing throughout the morning, slumped against the dollar as the ONS data emerged to $1.3915.

Read more: UK trade deficit widens but balance with non-EU countries narrows

Bad news?

Though exports to the EU fell in the three months to December, the government was keen to emphasise that in the first full year following the EU referendum, UK exports actually rose by 11.3 per cent to £617bn compared to 2016.

“As I meet my counterparts across the world, one thing always stands out: our country’s reputation for producing trusted, high quality products," said international trade secretary Liam Fox.

“These new figures are a testament to the hard work of companies up and down the country. As an international economic department, we will continue to build on this success by helping more companies export through our Exporting is GREAT campaign and network of trade advisers.”

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