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UK Trade Deficit Widens

James Boston
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UK Trade Deficit Widens

Britain is the latest country to report it’s trade balance numbers for the month of June this morning. The headline Total Trade Balance for the month now stands at a deficit of -£2.459Bn, this is in comparison to a May balance of -£2.418Bn and a market expectation for this to close to -£2.1Bn.

Weakness persists in the UK’s manufacturing sector as the deficit for the Goods Trade Balance was reported as -£9.413Bn, this compares to the figure released in May of -£9.204Bn and a consensus estimate that the latest number would be in the region of -£8.800Bn. The Non EU Trade Balance number is now running at -£3.841Bn compared to -£3.961Bn in May and the market consensus estimate that the deficit would be -£3.6000Bn.

The new Deputy Governor of the Bank of England, Ben Broadbent, has reassured markets that there is cause for concern around Britain’s persistently weak trade balances. Broadbent was responding to a recent claim by the International Monetary Fund (IMF) that the UK’s elevated balance of trade deficit posed a serious challenge to the long term prospects for the economy of Britain.

The otherwise healthy economy of Britain has recently experienced it’s largest current account deficit since the crises of the mid-seventies. The deficit does not present an immediate threat to the UK’s stability but it does open the door to the a significant tail risk event should Britain’s overseas trading partners and investors ever have a change of heart. Conscious of this fact the Chancellor of the Exchequer, George Osbourne, has made it a stated priority to affect a meaningful reduction to Britain’s deficit situation. To date the Chancellors efforts have had very limited results, and it is very unlikely that any more cuts aimed at deficit reduction will be implemented this side of the general election scheduled for next year.

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