Britain’s trade gap with the European Union (EU) in January grew to the highest level on record, focusing attention on the UK’s biggest economic partner as the Brexit debate hots up.
The UK Office for National Statistics (ONS) said Britain’s trade deficit with the EU hit £8.1bn in the month, and £23bn in the three months to January. Both of these figures are the highest since the ONS began collecting this data in 1998.
The figures will be argued over in the Brexit debate by “stay” campaigners who say the UK’s trade with the EU is vital, and “leave” campaigners who say Britain should focus on new fast-growing markets.
The EU accounts for around 50% of the UK’s exports, with Britain’s referendum on EU membership set for June 23.
But overall the UK’s trade deficit with the world narrowed by £200m to £10.3bn in January, reflecting a fall in the import of goods, the ONS said.
However, the data comes after a Markit/CIPS report on British manufacturers last week that said factory output in February was teetering on the brink of stagnation after expanding at its slowest pace for nearly three years last month.
The UK has been one of the fastest-growing advanced economies in the world for the last couple of years, but this growth is based around retail spending, and economists have long argued for greater manufacturing and exports to better balance the economy.
But economists say a slowdown in China and other emerging markets has hurt exporters.
The strength of the pound has also made UK goods more expensive abroad, although sterling has begun to weaken since UK prime minister David Cameron called the Brexit referendum last month.
Howard Archer, chief European economist at IHS Global, said: “Sterling’s recent marked weakening will take time to feed through to support export orders.
“Meanwhile, the upside for UK exports currently continues to be limited by muted global growth.
“Evidence of recently stuttering eurozone growth is a particular concern for UK exporters.”
The British Chambers of Commerce urged UK chancellor George Osborne to help exporters ahead of his Budget next Wednesday.
David Kern, chief economist at the British Chambers of Commerce, said: “We are not doing enough to boost our exports, and we urge the Chancellor to address this issue more forcefully in his forthcoming Budget.
“Much greater emphasis is needed to help small and medium sized businesses to export more and to break into new export markets.”