UK trade gap narrows as exports surge after EU vote

The shrinking of the deficit raises hopes the economy can continue to grow
The shrinking of the deficit raises hopes the economy can continue to grow

Surging export sales helped narrow the UK’s yawning trade gap in the first month after Britain voted to leave the European Union, official figures have revealed.

The Office for National Statistics (ONS) said the UK’s deficit on trade in goods and services hit £4.5 billion in July, shrinking from £5.6bn in June.

The brighter picture for UK trade came after total exports jumped by £800 million to £43.8bn, while total imports eased by £300m to £48.3bn.

Sales of jewellery and oil played a key role in driving up exports to the European Union by £1bn to £12.5bn over the period.

The plunge in the value of the pound to 31-year lows following Britain’s vote to leave the EU has made UK goods more competitive on the global market, helping exports to grow.

The shrinking of the trade deficit will raise hopes that the economy can continue to grow in the third quarter despite initial fears that Britain was heading for a recession.

Howard Archer, chief UK and European economist at IHS Global Insight, said the result adds evidence to the economy’s “current resilience”.

“A major hope for the UK economy going forward is that the substantial overall weakening of the pound since the UK voted to leave the European Union in June’s referendum will increasingly feed through to boost foreign demand for UK goods and services.

“While the pound has recently firmed from its post-Brexit vote lows, it is still at an extremely competitive level and is likely to remain so for an extended period,” he added.

The ONS said total exports were lifted in July by rising sales of ships and fuel, which both stepped up by £500m.