THE TRADE gap in the UK unexpectedly widened in June to fuel concerns about the impact that the strong pound is having on the price of British goods abroad.
Figures from the Office for National Statistics (ONS) claimed the country’s goods trade deficit widened to £9.4bn from £9.2bn in May, defying estimates that the gap would close to £8.8bn.
Led by energy products and other manufactured goods, ONS said the value of exports fell by £400m to £23.5bn. Economists are concerned that the recovery is largely driven by consumer spending while other parts of the economy such as manufacturing and construction lag behind.
The economy has recovered over the past year, with gross domestic product (GDP) expanding 3.1 per cent on an annual basis in the second quarter to return to pre-crisis levels.
The ONS released separate data today showing that construction rose by 1.2 per cent in June compared to May, which led it to revise its second-quarter estimate for the sector to flat from a 0.5 per cent fall. But as construction makes up just over six per cent of the economy, this does not alter the ONS estimate of overall 0.8 per cent GDP growth in the second quarter of the year.
The amount Britain imported also fell slightly in June by £100m to £32.9bn, led by fewer oil and aircraft sales. Including the UK’s £7bn services surplus, the overall trade gap came in at £2.5bn, up from £2.4bn in May.
Britain’s trade with its largest partner remains unchanged, with June exports to the European Union flat at £12bn.
Chris Williamson, chief economist at Markit, said the rise of the pound had made British-made goods more expensive abroad, adding that “the full effects of sterling’s appreciation over the past year have probably not been felt yet”.