UK trade deficit narrows in fourth quarter, ONS reveals

The UK trade deficit narrowed in the fourth quarter, boosted by an increase to exports to countries outside the European Union.

The Office for National Statistics on Friday said the deficit narrowed to £8.6bn from £14.1bn the previous quarter.

The pound has weakened sharply since the UK voted to leave the EU last June, making exports cheaper for countries the UK trades with but sending imports costs higher.

Exports of goods increased by 10.4% quarter-on-quarter, while imports of goods increased by 0.9%.

However, the ONS said “erratic” commodities such as non-monetary gold, aircraft and oil contributed to trade in goods, potentially masking the underlying trend.

In December, the deficit on trade in goods and services was scaled back to £3.3bn from £3.6bn, which the ONS said contributed to the narrowing in the fourth quarter.

Scott Bowman, UK economist at Capital Economics, said the figures show “encouraging signs” of a boost to exports from the lower pound.

“Indeed, quarterly growth in goods exports volumes accelerated from -4.9% in the third quarter to 7.1% in the fourth quarter, and growth in goods import volumes slowed from 3.8% to -0.4%,” he said.

“This suggests that net trade should have made a positive contribution to GDP growth in the fourth quarter after subtracting an average of 0.6 percentage points in the first three quarters of the year."