UK economy hit by slump in exports to EU
Trade was a significant drag on the UK’s GDP figures in the latest quarter, new figures show, as weakness in overseas markets contributed to subdued exports.
According to the Office for National Statistics (ONS), UK exports fell 2.5 per cent in the fourth quarter, the third consecutive month of decline.
The fall was entirely driven by deteriorating goods trade, with exports falling 6.9 per cent between October and December. Fuel, machinery and transport exports all fell in the quarter, the ONS said.
Paul Dales, chief UK economist at Capital Economics, said “soft demand overseas” had contributed to sluggish growth. Recent business surveys have pointed to “lacklustre” demand from European markets for many UK products.
The services sector performed better, with exports climbing 1.2 per cent in the quarter, continuing the divergence between goods and services trade. Across the year as a whole, goods exports fell 5.1 per cent in 2023/24, while services exports rose 3.4 per cent year-on-year.
William Bain, head of trade policy at the British Chambers of Commerce, said the UK’s trade performance was operating at “different speeds.”
“It is vital that we continue to make the most of our competitive advantage in services, but more must be done to bolster exports of goods,” he said.
Emily Fry, senior economist at the Resolution Foundation said the UK’s weakness in goods has been “broad-based” since 2019.
“Aside from crude materials, all categories have declined – especially chemicals and miscellaneous manufactures,” she said.
Imports for both goods and services increased in the latest quarter, rising 2.0 per cent and 2.1 per cent respectively.
With imports rising and exports falling, the UK’s trade deficit widened. The trade deficit reflects the difference between the value of a country’s imports and exports.
Excluding the impact of gold and other precious metals – which can often be volatile – the UK’s trade deficit widened to 1.4 per cent of GDP, compared to 0.8 per cent in the previous quarter.
“The trade deficit will likely remain wide in 2025 as rising wholesale energy prices raise import costs and President Trump’s tariff threats undermine global trade,” Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics said.
The trade figures formed part of the latest quarterly GDP estimates, which suggested that the economy grew 0.1 per cent in the final three months of last year.