Exports shrink trade deficit

The trade deficit in the UK shrank in March as exports to theus, Chinaandrussia grew strongly, official figures showed yesterday.

The UK’S trade deficit on goods and services was £2.7billion in March, compared with £2.9billion in February, while the deficit on goods alone was flat at £8.6billion.

Exports to countries outside the EU grew 12%, driven by chemicals and cars, while the eurozone crisis continued to take its toll as EU exports were flat month-on-month.

While the deficit shrank slightly, economists said net trade was still likely to have knocked 0.2% off gross domestic product (GDP) growth, putting a dampener on hopes that growth figures for the first quarter of the year would be revised upwards.

Vicky Redwood, chief UK economist at Capital Economics, said: “March’s UK trade figures showed a bit of an improvement, although the external sector still looks likely to have dragged on GDP growth in the first quarter overall.”

The UK economy shrank 0.2% in the first three months of the year, following a 0.3% decline in GDP in the final quarter of 2011, meaning the country entered a technical recession.

Chancellor George Osborne is relying ona shift in the economy towards the private sector, particularly in manufacturing and exports, to withstand his farreaching package of publicsector spending cuts.

The deficit in trade in goodswith theeu, theuk’s biggest trade partner, widened by £700million to £4.5billion in March, as exports were unchanged at £13.2billion and imports rose 4% to £17.6billion.