The UK’s trade deficit with the European Union widened to a record in the final quarter of 2022 as imports from the bloc jumped.
(Bloomberg) — The UK’s trade deficit with the European Union widened to a record in the final quarter of 2022 as imports from the bloc jumped.
The shortfall in the balance of trade in goods ballooned to £32.9 billion ($39.9 billion) in the three months to December, according to official data, the largest gap since records began in 1997.
It came as imports from the EU, excluding precious metals, hit a record high of £82 billion, the Office for National Statistics data showed Friday. Exports were £49.2 billion.
Goods imports increased by £1.6 billion or 2.9% in December, while exports decreased by £800 million or 2.3%. That may reflect some of the customs barriers that popped up after Britain left the EU.
“Brexit still is an important part of the picture, as it is continuing to hold exports back,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics. “In real terms, UK exports of goods — excluding erratics — were 9.4% below their 2018 level, before Brexit and Covid-19 impacted the data.”
In December alone, imports from the EU climbed by 3.8% to £28.5 billion, a new high. That was driven by a rise in purchases of machinery and transport equipment, especially ships from Germany, and fuel.
This figure was still £1.3 billion higher than imports from the rest of the world, despite full customs controls being introduced between the EU and Britain in January 2022.
However the ONS noted that changes to the way it measures trade with the EU from this date may have affected the data.
Just last week, Bank of England policymaker Catherine Mann said Brexit was adding to the cost-of-living crisis in the UK, and made the country “unique” in its bid to tackle inflation.
“No other country chose to unilaterally impose trade barriers on its closest trading partners,” she said.
The balance of total goods and services trade with the whole world also slipped to a record low of -£11.4 billion in December, according to the ONS, partly due to higher gas prices.
By contrast, exports from all advanced economies were 3.8% above their 2018 average in November, according to the World Trade Monitor from the Netherlands’ CPB, she said.
ONS estimates suggest that imports of services increased by £0.1 billion, or 0.4%, while exports decreased by £0.2 billion or 0.4% — a worry for Britain’s dominant services sector.
A summary of business conditions from the BOE’s network of agents across the country in the fourth quarter of 2022 suggested that households’ hesitation to part with their cash was affecting firms supplying consumer-facing businesses.
–With assistance from Andrew Atkinson.
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