Trade deficit surge heaps pressure on May’s EU talks

Theresa May’s efforts to open negotiations on trade with the EU were given added urgency on Tuesday after the nation’s deficit unexpectedly soared to its highest level for nearly a year.

Despite hopes that the 10%-plus fall in the pound since Brexit would boost the UK’s trading position, its deficit with the rest of the world on goods and services jumped by £1.7 billion to £4.6 billion over the month, the highest level since September last year.

While exports increased, imports grew at a faster pace, the Office for National Statistics said, with chemicals, manufacturing raw materials and transport goods being shipped into the UK.

Worryingly for Brexiteers looking for a rise in trading outside the EU bloc, exports of goods to non-EU countries fell by £4 billion, or 8.8%, in the three months to August while exports to the EU jumped by 4.1%.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “The latest trade data is further evidence that the decline in sterling’s value over the past year is doing little to boost the UK’s overall trade position.

“Businesses continue to report that the post-EU referendum weakness in sterling is hurting as much as its helping, with firms continuing to face higher input costs due to the weakening currency, particularly those locked into global supply chains. Businesses want to see comprehensive trade talks begin in the EU negotiations before the end of the year.”

Experts predict trade will drag on growth in the current quarter despite a slightly more upbeat performance from the UK’s manufacturers, which had their strongest growth of the year in July and August.

Builders also performed more strongly than expected in August although the economy has seen its first start to the year since 2012.