This meant that, despite a £90.3 billion surplus in services, the overall annual trade deficit — the difference between the amount that Britain imports and exports — increased by £300 million to £34.7 billion.
“Much more needs to be done to improve our trading position,” David Kern, chief economist at the British Chambers of Commerce, said. He added that there needed to be more emphasis on “helping small businesses to start exporting, as well as helping firms to break into new export markets”.
The Times reports that the figures from the Office for National Statistics are likely to prove a further setback to George Osborne’s target of doubling the UK’s annual exports to £1 trillion by 2020 and ensuring that 100,000 more British companies sell overseas. The last time that Britain ran a positive trade balance was in 1997.
The slowdown in China was highlighted by the ONS, which warned that the growth in exports to that country had been moving at a weaker pace since 2011. It said: “The slower growth in UK exports to China may reflect the easing in output growth and domestic growth in China, lowering the demand for UK goods and services.”
Economists were pessimistic that trade growth would pick up this year, despite a fall in the value of sterling making British goods more appealing to overseas customers.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “With global trade flows slowing and UK goods still uncompetitive despite sterling’s depreciation since December, we expect a poor trade performance to continue to impede economic recovery this year.”
Britain’s total trade deficit fell in the final three months of last year, the ONS said. Between October and December, the total trade deficit widened by £1.8 billion to £10.4 billion, which marks the biggest quarterly trade gap since the start of last year. The increase in the three-month figure was driven by a fall in exports in goods, which slipped by £500 million to £69.8 billion, led by dips in the exports of chemicals and oil.
However, measured on a monthly basis, the plunge in oil prices to their lowest level since February 2009 helped to narrow December’s trade deficit to £2.7 billion, an improvement on the £4 billion gap in November.
The widening deficit in the fourth quarter is likely to drag down the second estimate of GDP growth for the last three months of the year, the ONS said. In its first estimate, made last month, the economy was estimated to have increased by 0.5 per cent.
Martin Beck, senior adviser to the EY Item Club, said that there were some positive elements to the trade figures, including the volume of goods exports to the United States growing by 15 per cent and to the European Union by 7.7 per cent. However, he forecast that net trade in the year would continue to exert “a progressively smaller drag” on the economic growth of the UK.
