Britain’s trade deficit unexpectedly widened in October after imports into the UK soared to a record high, official figures have shown.
Imported goods increased by 3.4% to £31.6 billion – the highest total since records began in 1992 – driven by high purchases of chemicals from other European Union nations, the Office for National Statistics (ONS) said.
Exports rose 4.1% to £23.1 billion, the highest level since 2006, but this was not enough to prevent the trade deficit widening to £8.5 billion from £8.4 billion in September.
Economists said a widening trade deficit would be a blow to hopes that net trade – when exports outstrip imports – can make a positive contribution to economic growth in the fourth quarter of the year.
After slashing public sector spending, the Government has pinned its hopes for economic recovery on the private sector, and net trade will be key to growth.
Recent data has offered hope for exports. The export orders index of the manufacturing purchasing managers’ survey rose to a seven-month high in November, and Thursday’s CBI industrial trends survey showed strong improvement.
But the escalating eurozone debt crisis – with nations including Ireland, Spain, Portugal and Italy all falling victim – has cast a shadow over export trade in the months ahead.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “There is concern that UK exports could be hit increasingly over the coming months by slower global growth and companies will certainly be worried by the current turmoil in the eurozone as it is a key market.”
But Vicky Redwood, senior UK economist at Capital Economics, said the significant increase in exports should not be ignored. She added: “The recent pick-up in the survey measures of export orders also bodes well for the next few months. Of course, there are still some clouds on the horizon, most notably the troubles in parts of the eurozone. Nonetheless, it is obviously of some reassurance that exporters finally appear to be deriving at least some benefit from the combination of a lower pound and recovery in global demand.”
Import prices for traded goods shot up by 1.7% in October, figures which are likely to concern the Bank of England. Inflation has been stubbornly high in recent months – rising to 3.2% last month and remaining well above the Bank’s 2% target.