UK trade deficit widens in June but balance improves in Q2

Likewise, manufacturing output fell 0.7 percent, reversing the 0.7 percent increase in the prior month.

Britain’s trade deficit with the rest of the world narrowed markedly in the second quarter and looks set to boost economic growth, although analysts warned that the improvement may not last.

In terms of goods, the UK has a deficit of £9.2bn.

The fall was balanced out by manufacturing output posting an increase of 0.5%, a little higher than estimates of 0.4%.

For the second quarter, industrial production fell 0.7% sequentially, while rising 1.0% year-on-year.

A strong pound makes UK exports more expensive so traditional economic theory would lead one to expect a reduction in UK exports. While some policy makers are expected to push for an increase in borrowing costs to counter growing wage pressures, recent surveys suggest the economy lost some momentum at the start of the third quarter.

The UK’s trade deficit widened again in June as a strong pound continues to hamper exports by British companies, but trade still made a positive contribution to the economy in the second quarter overall, official data show. France, the Netherlands, the Irish Republic and China are the next biggest export markets.

The greatest barriers to exporting among services firms – a sector in which Britain remains a net exporter – were differences in regulations and standards, as well as language or cultural differences, the BCC survey found.

The figures come as the Bank of England prepares to release its latest interest-rate decision together with quarterly forecasts.

Earlier in the week, a report from the British Chambers of Commerce (BCC) said the greatest barriers to exporting services were differences in regulations and standards, as well as language or cultural differences.