Sterling stumbles on UK trade report

The latest UK trade report disappointed in more ways than one. Not only did it show Britain’s trade in goods deficit widened unexpectedly in February, but it also illustrated that the UK economic recovery remains unbalanced.

The British trade in goods deficit widened to a seven-month high of £10.3 billion; much wider than consensus estimates of £9 billion. The non-EU trade deficit also came in worse than expected at £3.2 billion.

A decline in exports and an increase in imports were cited as the main driver behind the widening, according to the Office for National Statistics.

Instead of an export-led recovery, these figures show that the UK’s economy remains dependent on the services sector and consumer spending. It will be unwelcome news for the government ahead of the general election, and also resulted in the pound stumbling lower.

David Kern, chief economist at the British Chambers of Commerce, noted that long-term sustainable growth will not be possible in the UK “unless we see firm action to improve our export performance”.