Trade deficit shrinks to £1.5bn

Exports of goods surged 9.3 per cent to £25.8bn in July, while imports were down by £700m or 2.1 per cent, according to the Office for National Statistics.

Economists welcomed the improvement but said the turnaround was partly due to the balancing of one-off factors seen in June, when trading was disrupted by the extra bank holiday for the Queen’s Diamond Jubilee.

Martin Beck, UK economist at Capital Economics, said the figure showed a surprisingly large improvement following June’s “awful” figures, when the deficit rose to £4.3bn.

But he added that it is “unlikely to herald the start of the long-awaited rebalancing of the economy towards the external sector”.

The rebound in exports is in line with Friday’s improvement in UK industrial output, which showed a 2.9 per cent surge on a month earlier in July.

However, the impact of the eurozone crisis was still felt during the month as the deficit on trade in goods with non-EU countries decreased by £2.2bn, compared with only £700m with EU members.

The proportion of UK goods exports going to eurozone countries fell to 43.6 per cent, the lowest share since records began, while monthly exports to non-EU countries reached a record high, Mr Beck added.

“Trade plays a key role in getting the UK back on the path to growth,” said the Government.