Today’s bad news of a larger-than-expected fall in the UK’s GDP at the end of last year was offset by reports of an improvement in the trade balance.
Britain’s current account deficit shrank to £8.5 billion in the fourth quarter of 2011. The ONS also revised down its estimate of the current account deficit in the third quarter of the year to £10.5 billion, down from a previous estimate of £15.3 billion.
The improvement in the trade balance was driven by a fall in the country’s trade deficit — the surplus of imports over exports — and an increase in investment income from abroad. The UK’s trade deficit fell from £8.8 billion in the third quarter to £7.1 billion in the fourth quarter. The income surplus rose to £4.6 billion, up from £4 billion over the previous three months.
The ONS now believes the overall current account deficit of the UK in 2011 was £29 billion — a marked improvement on 2010 when the UK deficit was £48.6 billion.
Economists welcomed the trade figures. Howard Archer of IHS Global Insight said: “The fourth-quarter balance of payments data show a much-needed improvement. The economy could certainly do with more of the same this year.”
George Osborne is relying on Britain’s export industry to power the country to growth in the coming years. A falling current account deficit will be one indicator of success on that front.
