UK trade gap narrows

The latest figures from the Office for National Statistics (ONS) have revealed that the UK's trade gap has closed markedly.

The trade deficit, the difference between exports and imports, of goods and services was £3.8 billion in March, compared with £5.4 billion in February. The surplus on trade in services was £1.6 billion in March, £0.1 billion lower than in February. The deficit on trade in goods in March was £5.5 billion, compared with a revised deficit of £7.0 billion in February, originally published as a deficit of £6.5 billion.

The ONS revisions to February data are largely due to later data for oil exports and trade associated with VAT fraud - both are volatile and difficult to calculate.

While the estimates of the impact of missing trader VAT fraud are difficult to predict, HM Revenue & Customs are considering solutions to better estimate this problem.

Following a change in the pattern of trading associated with Missing Trader Intra-Community (MTIC) fraud, identified by Her Majesty's Revenue and Customs, interpretation of the breakdown between EU and non-EU trade is more difficult.

The ONS said that originally, most carousel chains only involved EU member states. More recently, there has been an increase in carousel chains that include non-EU countries, for example, Dubai and Switzerland.

However, the import adjustment is applied only to EU imports as the goods return to the UK via the EU - but it is this part of the trading chain that is not recorded.

The deficit on trade in goods with the EU was £0.9 billion smaller than in February at £2.9 billion as imports fell but exports were virtually unchanged.

Exports of crude oil and chemicals to EU countries rose while exports of capital goods fell. Imports of capital goods, oil other than crude oil, and aircraft fell.

The deficit with non-EU countries narrowed to £2.6 billion from the deficit of £3.3 billion in February. There was a rise in exports of £0.4 billion while imports fell by £0.3 billion. Exports of intermediate goods rose. There were increases in imports from non-EU countries of crude oil of £0.2 billion. Imports of chemicals fell by £0.3 billion, of aircraft by £0.2 billion, and of fuels other than oil by £0.1 billion.

Excluding oil and erratic items, the volume of exports fell by 0.5% between February and March and the volume of imports fell by 4%.

(SP/KMcA)