Shrinking trade deficit lifts hopes of economic rebound

BRITAIN’S trade deficit with the rest of the world shrank dramatically this spring – fuelling hopes of an economic rebound.

Figures from the Office for National Statistics showed the gap between exports and imports narrowed from £3.1bn in March to £1.2bn in April – the smallest since March last year.

The trade-in-goods deficit – which strips out services – fell from £10.7bn to £8.6bn in the biggest decline since June 2013.

Exports of British-made goods increased by £659m to just under £24.5bn while imports fell by £1.5bn to just over £33bn.

Experts said the figures suggested trade could help lift economic growth in the second quarter of the year – reversing the slowdown in the first quarter.

The economy grew by just 0.3pc in the first three months of 2015 with trade knocking 0.9 percentage points off gross domestic product as exports vastly outweighed imports. Vicky Redwood chief UK economist at Capital Economics said: ‘The sharp narrowing of the UK deficit in April is reassuring news and suggests that net trade this quarter is unlikely to repeat the first quarter’s big drag on overall GDP growth.’

The majority of the increase in goods exports – some £604m – was accounted for by sales to countries beyond the European Union. Sales to the EU rose by just £55m and accounted for just 45.1pc of total goods exports – the lowest level since records began in 1998.

John Longworth (pictured) director general of the British Chambers of Commerce said: ‘While the EU is still a major trading partner, the continued economic stagnation across the eurozone has stimulated UK businesses to seek out new growth markets further afield.’ Official figures from Eurostat yesterday showed that GDP rose by 0.4pc in both the eurozone and the EU in the first quarter of the year as the economy finally showed signs of life. Output in Spain was up 0.9pc and France enjoyed growth of 0.6pc, while German and Italy saw growth of 0.3pc – the same as the UK.