New UK trade deficit figure prompts alarm as exports fall

Britain’s trade gap remained alarmingly high in November after exports fell to their lowest value since last July.

Official figures showed the deficit in goods and services narrowed to £3.2bn compared with £3.5bn in the previous month, but this was only after a drop in oil imports and a £2.4bn fall in the value of “unspecified goods”, mainly gold, brought into the country.

The persistently high level of the UK trade deficit leaves George Osborne with a headache and will likely lead to growing calls for further action to boost exports.

The chancellor warned on Thursday about a “dangerous cocktail” of economic risks which meant 2016 was likely to be one of the toughest years since the financial crisis.

Related: George Osborne’s ‘cocktail of threats’ will leave us with a hangover | John McDonnell

Zach Witton, deputy chief economist at EEF, the manufacturers’ organisation, said: “While the narrowing of the trade deficit for goods in November is a positive development, there’s little encouragement for UK manufacturers because it was solely driven by lower imports. Disappointingly, exports remained lacklustre.

“The UK’s export performance will be a key indicator to watch in 2016. Exports are set to remain under pressure from weak demand flowing from slower growth in emerging markets, particularly China. Yet stronger economic growth in the US and the eurozone should provide some support.”

Exports fell by £500m or 1.2% to £42.2bn. The Office for National Statistics said this decrease comprised a £200m fall in the export of services and a £300m drop in the export of goods, specifically finished manufactures.

Total imports fell by £800m to £45.4bn over the same period, largely as a result of a sharp decline of £500m in the import of fuels, mainly oil, and the drop in unspecified goods.

Dennis de Jong, managing director at UFX.com, said the chancellor “has a lot of work to do” to redress the trade deficit.

“Osborne used a speech [on Thursday] to warn of the risks to the British economy ahead, and reaffirm his commitment to further austerity measures. It signals that an interest rate rise is some way off.

“However downbeat the prospects for the British economy in the year ahead, Osborne and Co. will be thankful that there are many major economies in a worse state. All eyes will now turn to China in the short term to see how big an effect the slowdown and share sell-off has on the UK.”

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