Trade figures hit new low
Today’s trade figures show that the trade deficit for goods and services hit £4.8 bn in December and the deficit for goods alone was £9.2 bn; both were the worst figures ever. The annual trade deficit for 2010 was £46.2 bn, up from £29.7 bn in 2009. The £51 bn annual surplus on trade in services was down £1.7 bn from 2009.
In December, there was a £3.4 bn deficit in trade with EU members, which is not out of line with other months. But getting on for two thirds of our trade is with non-EU members, where the deficit – £5.8 bn – is the worst ever. The £42.2 bn 2010 annual trade deficit with EU members was up £4.4 bn from 2009. The deficit with non-EU members in 2010 was £55 bn, up £10.4 bn from 2009.
The government’s hopes for an export-led recovery can’t stand many more results like this. The Office for Budget Responsibility’s Economic and Fiscal Outlook forecast a 2010 deficit of £37 bn (see table 3.6), not £46 bn; this is the equivalent of about an extra third to half a per cent off GDP.
If past experience is anything to go by, we shouldn’t rely on net trade to boost the economy too much. In the last two recessions imports recovered just as strongly as exports:
You also hear the claim that this is nothing new, that Britain relies more on trade in services and that our goods balance has always been negative. Actually, that isn’t correct; if you look at goods imports as a proportion of goods exports, you can see that thirty years ago the balance was reversed:
Although the ratio improved after the last recession, it never reached 100 per cent.
Perhaps this shouldn’t come as a surprise. The British Chambers of Commerce’s International Trade Survey found that most companies have no interest in exporting: more than two thirds weren’t current, recent, or likely future exporters. Of these, 70 per cent said their products weren’t suitable for export and only ten per cent said they would be more likely to export if help were available from the government.
This country’s negative balance of payments is a chronic problem; we really shouldn’t be basing our economic plans on the belief that its going to disappear.