[A-List] UK economy: yawning trade gap

[Michael Keaney]

£3.6bn trade gap is the worst in 300 years

Larry Elliott, economics editor
Wednesday December 11, 2002
The Guardian

The government's record on manufacturing was under attack last night after
plunging exports saw Britain's trade in goods fall into its deepest deficit
since the state began collecting records in 1697 during the reign of William
of Orange.

The Conservatives and the Liberal Democrats seized on a set of dismal
figures showing that UK trade in manufacturing, food and oil was in the red
by £3.6bn in October, compared with a shortfall of £2.7bn the previous
month.

Tim Yeo, the opposition trade and industry spokesman, said the data
underlined the serious imbalances within Britain's economy, a view shared by
the Engineering Employers Federation.

"Sadly a government which daily adds to the burdens on business and erodes
our competitive position shows no sign of either heeding the danger or
tackling its causes," Mr Yeo said.

Matthew Taylor, the Liberal Democrats' treasury spokesman, said: "Continued
large trade deficits are proof of the business crisis in the UK, as markets
are squeezed by the high exchange rate.

"With the longest manufacturing recession since the war and the deepest
recession since 1981, it's time for the chancellor to take action."

Yesterday's figures from the office for national statistics underlined the
warning from chancellor Gordon Brown in last month's pre-Budget report about
the impact of a weak global economy on international trade.

Mr Brown is predicting a rebound in Britain's exports next year on the back
of a stronger global economy, but the latest figures reflect how tough the
conditions facing Britain's exporters are.

The value of Britain's goods exports fell by almost 4% in October, while
imports were up by just over 1%. Over the latest three months, which
statisticians consider a better guide to the trend than one month's figures,
both exports and imports were down - by 8.2% and 1.6% respectively.

Even though the deficit in goods was partially offset by Britain's
traditional surplus in services, officials said that the country's
underlying trade picture was deteriorating. In the three months to October,
the figures showed a deficit in goods of £9.8bn - another record.

The ONS said that total exports had fallen by £4bn over the latest three
months, with the collapse in the demand for hi-tech goods blamed for a hefty
drop in overseas sales of computer components, such as microchips.

Exports to the Irish Republic, which became a European base for US computer
firms in the 1990s, fell by £1.4bn as a result of the global downturn since
the end of the dotcom boom almost three years ago. A new lobbying group set
up yesterday, Manufacturers for the euro, said the failure to join the
single currency was to blame for the poor performance of exports.

Alan Wood, chief executive of electronics group Siemens and president of the
new group, said trade depended on a level playing field in the European
market. "But since the launch of the euro, the balance has been tilted
decisively against us.

"Over the last few years, British manufacturing has taken a pounding. Export
orders have been lost, profits have fallen, some companies have scaled down
or closed down their operations and inevitably jobs have been lost."