Trade deficit grows to £4.9bn after oil price blow

THE British economy showed few signs of rebalancing in December as the trade deficit jumped and industrial production took a blow – though economists hope it is just a blip in a positive longer-term trend.

The closure of the Forties pipeline for repairs slashed oil and gas output by 24.2pc month on month, while the higher global oil price pushed up import costs, just as those imports increased.

Poor services trade numbers also contributed to the £4.9bn deficit in December, the Office for National Statistics said, a rise of £1.2bn on the month.

The quarterly trade deficit of £10.8bn was the biggest since the third quarter of 2016. Over 2017 as a whole exports rose by £62.5bn, outpacing the £55.5bn rise in imports, and so reduced the deficit to £33.7bn.

Despite the drag from trade in December the economy still accelerated overall in the final quarter of the year to grow by 0.5pc.

Healthy manufacturing and services numbers support a picture of accelerating growth, and even the struggling construction sector returned to expansion in December.

Over the year as a whole manufacturing output increased by 2.8pc while production – which adds industries including utilities and mining to manufacturing – rose 2.1pc.

Despite falling for three consecutive quarters, strong growth at the end of 2016 and in the opening months of 2017 helped construction output to rise by 5.1pc last year, compared with 2016.

The National Institute of Economic and Social Research predicts UK GDP grew 0.5pc in the three months to January, with the manufacturing and services sectors contributing to the expansion. “We are forecasting GDP growth of close to 2pc this year assuming a soft Brexit scenario,” said Niesr’s Amit Kara. “At this speed the economy could start to overheat unless the Bank of England withdraws some of the stimulus that it has injected by raising the policy rate.”

Mr Kara anticipates an interest rate rise in May, and another hike every six months until they reach 2pc.