UK trade deficit narrows in July as oil exports boost GDP hopes

The UK’s trade deficit fell sharply in July helped by an increase in exports, especially of oil to the European Union (EU), according to official data published by the Office for National statistics (ONS).

The deficit fell to £1.5 billion in July, compared to £4.3 billion in June. This was broken down into a deficit of £7.1 billion on goods compared to a surplus of £5.6 billion on services.

Overall, exports of goods increased by nine per cent to £25.8 billion, with imports declining by 2.1 per cent to £32.9 billion. Meanwhile, exports of services fell by 0.9 per cent to £15.6 billion, with imports of services down by 0.4 per cent to £10 billion.

The ONS said that exports were helped by an increase in the sale of chemicals and consumer items to non-EU countries.

The ONS said that the last three months had seen a combined deficit of £8 billion, compared to a deficit of £10.5 billion in the quarter before.

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The sharply reduced trade deficit in July suggests that net trade could well make a rare recent positive contribution to GDP in the third quarter after being a major contributor to the contraction suffered in the first half of 2012.”

The UK has been in recession since the last quarter of 2012, with the last quarter showing a contraction of 0.5 per cent in April to June 2012.

Mr Archer believes the outlook for trade still has dangers. He said: “The underlying situation for UK trade still looks troublesome with exports under pressure from weakened global growth, particularly contracting eurozone domestic demand.”