Falling oil prices help the UK close its trade deficit

The UK's trade gap is narrowing, as falling oil prices drive down the price of imports relative to exports.

 

According to the Office for National Statistics, in November last year the deficit fell to £1.4bn – a decrease of £1.1bn from the previous month and lower than any point since June 2013. 

 

This large fall was driven by a decline in the value of imports, and in particular that of oil. There was a £700m drop in oil imports during that time.

 

Since August, the price of Brent crude has gone down by more than 50 per cent. It is largely blamed on an oversupply, with domestic oil production rising in the US and demand slowing down in countries such as China.

 

However, a chief UK economist has warned that the fall must not lead to “complacency”. 

 

David Kern of the British Chambers of Commerce said the UK “faces a national challenge when it comes to trading the world”.

 

“The Monetary Policy Committee must persevere with low interest rates for most of this year and we need to redouble our efforts to place exports at the heart of businesses' growth strategy if we are to achieve the government's export target and rebalance the economy."