UK current account deficit running at a near record high
The UK's current account deficit is still running at a near record high, stoking fears about a balance of payments crisis in the wake of the UK's referendum on the EU.
The deficit – a measure of the difference between money coming in and going out of the country – came in at £32.6bn in the first three months of the year according to the Office for National Statistics (ONS). That equates to 6.9 per cent of the UK's GDP, the second largest figure for any quarter on record.
The ONS also said the deficit at the end of 2015, which was the worst quarter on record, was even higher than previously thought. It now estimates £34bn was sucked out of the country between October and December 2015 – 7.2 per cent of GDP, up from the previous calculation of seven per cent.
The current account is made up of three different components – trade, primary income and secondary income – and the UK is running a deficit in every single one of them.
The trade balance is the difference between exports and imports; primary income measures the difference between how much UK residents earn on foreign assets and how much foreign residents earn on UK assets; while the secondary balance includes remittances and other payments such as foreign aid.
The high current account deficit has raised fears about how well the UK economy could weather an economic shock, such as a vote to leave the European Union. Governor of the Bank of England Mark Carney said the high deficit left the UK relying on "the kindness of strangers" – something which could disappear after a vote to Leave.
However, others see the current account deficit as a sign of strength in the UK economy. For instance, strong consumer confidence could result in imports jumping. Similarly, if UK companies perform well, then overseas investors will be taking chunks out of the country in dividend payments.