UK current account deficit narrows more than expected, ONS reveals

The UK's current account deficit narrowed more than expected in the second quarter, the Office for National Statistics revealed on Wednesday.

The deficit fell to £16.8bn in the three months to June, down from a revised deficit of £24bn in the first quarter. Analysts had been expecting a deficit of £22bn.

The second quarter deficit came to 3.6% of gross domestic product at current market prices, compared to 5.2% in the first three months of the year, as the trade deficit shrank to its smallest since 1998.

The UK’s total deficit in trade on goods and services dropped to £3.5bn in the second quarter from £10.5bn in the first quarter.

The ONS said the biggest driver was an increase in exports which rose by £4.5bn.

“The Quarterly National Accounts confirmed that the economic recovery maintained a strong pace in the second quarter,” according to Capital Economics.

“And although the latest business surveys suggest that growth may have moderated in the third quarter, we expect this to be only temporary.”

Howard Archer, chief UK and European economist at IHS Global Insight, said it was “important” that the UK reduces its deficit. The current account deficit has been a cause for concern for the Bank of England, he said.

“While the markets have so far taken a relatively relaxed view of the United Kingdom’s elevated current account deficits, it could become an increasing problem if the markets lose confidence in the UK economy for any reason.”