Business

UK trade deficit widens in May

Ship enters Felixstowe port

The UK's trade deficit widened in May after the value of exports fell faster than imports.

The figures, which precede the Brexit vote, show the deficit in goods and services widened to £2.26bn, up from a downwardly-revised deficit of £1.95bn in April.

The deficit on trade in goods alone was £9.9bn in May, up from £9.4bn in April.

The Office for National Statistics said goods exports fell £2.1bn to £23.7bn, while imports fell £1.6bn to £33.5bn.

The sharp fall in the value of the pound since the EU referendum vote - it is currently at its lowest level for 31 years against the US dollar - has prompted hopes that it will boost demand for UK goods.

'Bleak picture'

But Howard Archer, chief economist at IHS Global Insight, said there was "no guarantee that the markedly weakened pound will provide a major boost to UK exports".

He said the very fact of the UK leaving the EU could hold back economic growth in both the EU and globally, which would hit demand for UK exports.

Mr Archer added that "imports are likely to rise markedly in value terms in the near term due to the sharp drop in sterling".

However, he said that the volume of imports could be affected by weakening domestic demand.

The British Chambers of Commerce said the figures painted a "rather bleak picture" of the UK's external position.

Suren Thiru, the lobby group's head of economics, said not all exporters would necessarily benefit from the lower pound.

"A weak pound is something of a double-edged sword, as many UK exporters are also importers as a result of global supply chains and so will be facing higher input costs due to the weakening currency."

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