‘Disastrous’-looking data worse than expected as sales of chemicals and cars fall
A drop in sales of chemicals and cars left Britain’s goods trade gap wider than expected in April, cementing concerns that exporters face a tough year ahead.
The Office for National Statistics said the UK’s goods trade deficit widened to £10.1bn – meaning the UK is importing more goods than it is exporting – compared with forecasts of a gap of £8.5bn, and a deficit of £8.7bn in March. One analyst said the “disastrous” figures confirmed the need for the emergency measures announced by the Bank of England and Treasury on Thursday night.
Exports of goods to non-EU countries plunged 10.3%, while imports from those countries slipped back by 1.9%. Trade deteriorated with the EU, with exports falling 6.8% and imports declining by 3%.
The sale of chemicals dropped by £800m to countries, including Germany and the US, where drug companies cut orders.
Construction output figures for April also painted a gloomy picture, with an 8.5% drop. A 4.8% fall in construction in the first quarter drove Britain further into recession than initially thought.
David Tinsley, an economist at BNP Paribas, said: “In broad terms, the numbers look disastrous. There is a fall-off in exports to EU and non-EU countries. That ties in with the evidence that there has been a downturn in the global manufacturing cycle, and the UK is not immune to it.
“As things are not going to get better abroad, supporting the domestic economy is pretty important. That ties in with what the Bank of England governor and the chancellor said …. It is about putting up the storm shutters before the hurricane hits.”
He was referring to the announcement on Thursday night that the Treasury and the Bank of England will take emergency measures to offer banks cut-price funds, provided they pass on the benefits in the form of business loans.
But economists expressed concerns that these measures were not enough to contain the fallout from the debt crisis.
Vicky Redwood, at Capital Economics, said: “Given the risky environment, banks may simply not want to lend more, even with the carrot of cheaper funding. And there is no guarantee that firms and households will want to borrow.
“Lastly, high bank funding costs are just one challenge facing the UK economy. Indeed, these moves on their own will do little to reduce the effect of the eurozone crisis on UK exports or reduce the uncertainty facing UK companies.”