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UK exports to US and non-EU narrows trade gap

  • Published at 08:30 am May 12th, 2013
UK exports to US and non-EU narrows trade gap

Britain's trade deficit in goods narrowed slightly in March, fuelled by a rise in exports to fast-growing markets outside the European Union.

Exports of goods to other EU member states were flat, but sales to non-EU countries were up 10% on the previous month, while exports to the US soared 21% on February's level.

Separate figures showing a surge in construction activity during March also supported the improving economic picture in recent months that allowed the UK to avoid a triple-dip recession.

The British chancellor (finance minister) George Osborne is also likely to be cheered by revisions to last year's initial estimates for the construction sector that could erase even the double-dip recession from the economic records.

The chancellor, who is under pressure to speed up the recovery, could be told as early as next month when official data are revised by the Office for National Statistics (ONS), that the economy was flat during the winter of 2011/12 rather than contracting.

The ONS believes construction output in the first quarter of 2012 contracted by 5%, not the 5.4% previously thought. The smaller contraction will put less of a drag on the overall figure for activity in the economy and probably raise the GDP growth figure for the three months from -0.1% to 0%.

Philip Shaw, UK economist at fund manager Investec, said the upward revision in construction activity "means the UK probably avoided a double dip recession at the beginning of 2012, which must be good news for a chancellor when the International Monetary Fund is in town".

The IMF is in London to run its sliderule over the government accounts ahead of its annual assessment of the economy and the Treasury's recovery plan.

IMF boss Christine Lagarde has hinted that the report will urge Osborne to relax some of his public spending cuts and tell him to divert funds into infrastructure investment.

The trade figures for March showed a 3.5% month on month rise in exports, more than offsetting growth of 2.6% in imports. The overall trade deficit narrowed from GBP3.4bn to GBP3.1bn.

Construction output rose 12% in March compared with the previous month, although for the first quarter it fell 2.4% compared with the previous three months.

The construction industry has performed badly since the financial crash and the ONS emphasised the point with figures showing output was at its lowest level since 1997.

Economists cautioned that the poor state of the construction industry and the continuing trade deficit, which is a drag on growth, showed the outlook for the UK remained weak and open to ill-winds blowing from the eurozone.

Shaw said figures that pointed to a triple-dip recession underestimated the underlying strength of the economy, but Britain was "not out of the woods yet".

Martin Beck, UK economist at Capital Economics, said: "The generally good run of recent data can't disguise the fact that, in its domestic and overseas performance, the UK economy remains pretty sluggish."