THE UK trade deficit widened to the highest level in nearly seven years in April as exports to the embattled eurozone plummeted.
The goods and services deficit – the gap between imports and exports – rose to £4.4bn from £3bn in March, the Office for National Statistics (ONS) said.
The increase was driven by an 8.6% drop in exports, including a 6.8% fall in exports to the EU, the UK’s biggest trade partner, as the region’s debt crisis rumbled on.
Official construction data showed a 13% fall in output in April driven by a fall in government projects, including housing and infrastructure.
The double dose of disappointing news dampened hopes that the economy may return to growth and emerge from recession in the second quarter, analysts said.
Howard Archer, chief European and UK economist at IHS Global Insight, said: “With the trade deficit widening in April and construction output disappointing, the chances of the economy avoiding further contraction in the second quarter are dwindling.”
The UK economy shrank 0.2% in the first three months of the year, after a 0.3% decline in GDP in the final quarter of 2011, meaning the country entered a technical recession.
Chancellor George Osborne is relying on a shift in the economy towards the private sector, particularly in manufacturing and exports, to withstand his far-reaching package of public sector spending cuts. The Chancellor and Bank of England governor Sir Mervyn King this week unveiled plans for a multi-billion- pound emergency bank funding scheme to kick-start lending to households and businesses in a bid to boost growth.
But Martin Beck, UK economist at Capital Economics, said the trade and construction figures were likely to dampen the positive mood.
He said: “Looking forward, the dominating influences on the UK’s external position are likely to be the continuing impact of the eurozone crisis on exports. These figures further dash any hopes that the external sector might pull the UK out of recession.”
The fall in total exports of goods was driven by lower exports of chemicals to EU countries including Germany, precious stones to EU countries including Belgium, and ships to non-EU countries. There was a drop in car exports to non-EU countries, including the United States, China and Russia.
The weak construction figures will fuel fears the sector will continue to weigh on overall economic growth after a dismal performance.
David Kern, chief economist at the British Chambers of Commerce (BCC), called on the Government to do more.
He said: “Our businesses do not want handouts, but they need to see action which allows them to compete with overseas competitors.”