Trade deficit at highest since 2010

Despite lower oil prices helping production, turmoil in the eurozone is hampering export sales
Despite lower oil prices helping production, turmoil in the eurozone is hampering export sales

Britain’s annual trade deficit grew to its highest level since 2010 last year, official figures have shown.

The shortfall for 2014 rose to £34.8 billion, up from £33.7bn the year before, according to the Office for National Statistics (ONS).

In December the deficit grew more sharply than expected to £2.9bn - the highest since July - from £1.8bn the previous month, as cheap oil prices saw volume imports of the commodity reach their highest level in more than six years.

The month saw a widening deficit in goods trade to £10.2bn while a surplus in the services sector narrowed to £7.3bn.

For the year, the goods deficit continued to widen, reaching £119.9bn. It is now more than five times higher than when comparable records began in 1998 and the figure stood at £22.2bn.

The figures are likely to cause concern amid efforts to rebalance the economy away from its dependence on domestic demand, with total goods exports falling by £14.6 bn from the previous year to £292bn.

It was the first time they had dropped below £300bn since 2010.

However on a quarterly basis the goods shortfall narrowed from £31.6bn in the third quarter of last year to £29.4bn in the last three months, as exports rose £2bn with manufactured products seeing a boost.

Trade with countries outside the EU was the main contributor to the quarterly goods deficit narrowing, the ONS said. The overall trade deficit also fell, from £8.7bn in the third quarter to £7.1bn in the fourth quarter.

Paul Hollingsworth of consultancy Capital Economics said: “While December’s trade data make for disappointing reading, the surge in oil imports masks a more encouraging underlying picture.”

“After a welcome pick up in the past two months, it is disappointing that our trade position weakened in December,” said David Kern, chief economist at the British Chambers of Commerce.

“We are clearly not making adequate progress in rebalancing our economy, and the weakening of the eurozone is creating problems for our exporters.”