According to figures released last week by the Office for National Statistics, the UK’s trade deficit in goods widened in February. The deficit rose to £10.34 billion from £9.174 billion in January.
Economists had forecast a shortfall of £9 billion. In the same month of 2014, the goods trade gap was £9.9 billion.
In the three months to the end of February, our goods deficit with the EU rose by £1.5 billion to a record high of £21.1 billion, representing the biggest gap since records began in 1998. The ONS said the widening reflected a 5.6% fall in exports, particularly oil.
Chris Williamson, chief economist at financial information group Markit, said: “The export trend for manufacturers has weakened, in a sign that the strong pound is hitting demand for UK goods in overseas markets. Further export losses look likely in coming months, dealing another blow to hopes that the UK economy is re-balancing away from domestic consumption towards exports.”
Paul Hollingsworth, an economist at Capital Economics, was more optimistic, saying: “Although demand in the euro-zone remains weak, many of our other main trading partners are still growing strongly. Accordingly, while there remain a number of obstacles for exporters this year, they should not prove to be insurmountable.”
David Kern, chief economist at the British Chambers of Commerce, said that the Government has to do more to support exporters.
“Unless we see firm action to improve our export performance, it is not clear how we will sustain strong growth in the long-term. The UK’s trade deficit with the EU reached a record high in the last three months and, while the EU is our largest trading partner, it is vital that we capture more of the export market in the fast-growing economies beyond Europe.”
Meanwhile, an interim report published by the Cole Commission — an independent body charged by Shadow Chancellor of the Exchequer Ed Balls — urges the next Prime Minister to take personal charge of export policy. The commission calls for “a revolution in export culture”, with the creation of a Cabinet Committee dedicated to exports to be chaired by the PM. It also calls for the role of Trade Minister to be made a Cabinet position.
Graham Cole, chairman of helicopter group Agusta Westland UK, who led the five-man commission, said: “The reality is the numbers are not getting any better. We have to do something substantial. We believe the importance of exports needs to be front and centre. Having the PM chairing a committee on exports would make a difference from early on.”
After several months of consultation and more than 70 submissions from industry, the interim report suggests a series of measures that include combining the Business Department with the Export Finance Department, to ensure
a “central hub from which to co-ordinate and drive the export agenda”.
The Government should also bring together all the different types of export support and services available to SMEs into a ‘one-stop shop’.
Commenting on the commision report, Lee Hopley, chief economist at the EEF, said: “The UK critically needs to up its export performance, to ensure stable and sustainable growth. Manufacturing has a key role to play in this but, as experience of the last few years has shown, increasing exports is not easy.
"The export target has come in for some criticism, and it is sensible to re-assess it to ensure realism, as the Cole report recommends. However, any replacement must maintain the principle of delivering focus to the Government’s efforts on the export agenda, to ensure that actions are co-ordinated and cross-departmental.
“The Cole Commission rightly takes a holistic approach, rather than narrowly looking at export support. It also takes into consideration wider issues such as the education pipeline, skills shortages and digital requirements.
"On this matter, recommendations to review the system of post-study work visas are particularly valuable, as this will help to ensure that UK companies have access to the skills they require.” The commission’s final report will be published after the General Election.