No change to trade gap as volcano halts exports

Jun 10 2010 by Iain Laing, The Journal

THE UK goods trade gap with the rest of the world failed to narrow in April during a month impacted by Iceland's volcanic ash cloud, according to new figures.

The goods trade gap with the rest of the world remained broadly unchanged at £7.3bn, the Office for National Statistics (ONS) said.

The figure disappointed experts looking for a boost in exports to help the UK economy and offset looming Government belt-tightening.

“It is looking increasingly unlikely that export growth will pick up sharply enough to offset the effects of the fiscal consolidation, at least in the near-term,” Capital Economics economist Vicky Redwood said.

Total goods exports and imports both fell by £100m as European airspace closed down due to safety fears.

The ONS said trade with non-European countries was likely to have been worse affected due to the greater share of goods shipped by air.

Exports to non-EU countries fell by £200m or 2.5% with non-EU imports £300m or 2.1% lower – contrasting with a slight rise in imports and exports from the EU.

The figures also showed a slight widening in the goods trade gap with EU countries from £3.2bn to £3.3bn over the month.

The weakness of the pound has bolstered the competitive position of UK firms in Europe with exports to the EU rising to £11.6bn during the month compared with £9.9bn a year ago.

But the sovereign debt fears that have hit several European countries have sparked concerns over the cuts to come to tackle deficits – impacting growth – while doubts over the health of the euro have seen the single currency fall to its lowest level against the pound since November 2008.

Ms Redwood added: “The continued problems in the euro-zone have raised the risk that export orders start to flag again. Not only does the outlook for euro-zone demand look weak, but the pound has risen by about 10% against the euro over the past three months.”