UK Balance of Payments shows Trade reducing
Recent UK Balance of Payments data shows Trade with the rest of the World reducing.
The UK Balance of payments deficit is how we measure the value of trade between the UK and the rest of the World.
What is a deficit?
There is usually a deficit. This means that we buy more from the rest of the World than we sell back.
The size of the deficit is measured and for the first three months of 2020 this figure has reduced, which would mean we are selling more and importing less.
But there is a catch to the story.
What does this cover?
The Balance of Payments covers trade in manufactured goods; services such as legal,financial, technology; and investments.
The total amounts for all imports and exports are added up and compared with each other. If the total imported is more than the total exported, we have a deficit. This does not mean we ‘owe’ this money to the rest of the World, but it does mean that we buy more in than we sell.
The deficit reduced from £3.6 billion to £2.3 billion. This 2.3 billion figure covers the first Quarter of 2020 (January to March).
So what is the catch?
The amount we imported and exported both fell significantly for the first three months of the Year. We exported (sold) 12 billion less to the rest of the World. We also imported (bought) 13.3 billion less.
There was a large reduction in the import and export of cars, clothing and pharmaceuticals. There was a big reduction in imports from China.
It is possible that the reductions are as a result of disruption to Trade caused by Covid 19 and the response to it as the UK and many of our trading partners went into lockdown. However, the ONS* say it is too early to be sure of this.
Sources & Notes
This data comes from the Office National Statistics, which is the official government agency for this data. Figures above exclude Precious Metals as per ONS reports, due to the way trading on the London markets can distort import and export figures for the rest of the economy.