By Martin Kelly
The UK’s already weak economy is deteriorating according to a leading Business analyst as latest figures show that the trade gap has widened to its worst for seven years.
The latest official figures show that the UK total-goods trade deficit grew to £10.1 billion in April, up from £8.7 billion in March.
Exports fell by 8.6%, of which 6.2% was to other European nations – an indication of the effect concerns in the eurozone may be having on the UK. The services sector showed a surplus of £5.7 billion, which brought the overall deficit down to £4.4 billion.
Peter Dixon, from Commerzbank, said: “I think if you look at where we are now… it does imply we’re on a deteriorating trend.
“It suggests that yet again the eurozone crisis is beginning to have a bigger drag on exports and as a consequence a bigger drag on Q2 GDP [second quarter gross domestic product] numbers. Along with the extra public holiday, it doesn’t bode well.”
There are now fears that the UK economy, already in a double dip recession, will contract further.
Howard Archer, chief European and UK economist at IHS Global Insight, said: “With the trade deficit widening in April and construction output again disappointing, the chances of the economy avoiding further contraction in the second quarter are dwindling.”
The UK economy officially entered a double dip recession in April after the second successive quarter showed negative growth. The 0.3% contraction was driven by a 13% fall in the construction sector.
Responding to the news, Scottish Building Federation chief executive Michael Levack said: “If the UK government is serious about rebuilding economic confidence and ending continuing job losses in the construction sector, it needs to change course and start investing in the infrastructure the sector and the economy as a whole so desperately need.”
The disappointing trade figures followed moves by Chancellor George Osborne to try to tackle the failing economy through a bank lending scheme.
Announced on Thursday, the “funding for lending” scheme will see the Treasury give more money to Banks on the condition they lend it to businesses.
Whilst welcoming the initiative, SNP Treasury spokesperson Stewart Hosie said it was not enough and again called for funding for Scotland’s 30 ‘shovel ready’ projects.
Mr Hosie said:
“The lack of bank lending remains a huge concern for businesses up and down the country, so measures to increase the flow of credit are welcome. However it’s crucial to ensure the cash being released in these new schemes actually hits the targets and flows to the businesses that need it most.
“There is little evidence to suggest this emergency scheme on its own is enough to get the economy moving. It’s time for a change of course from the UK Government, with a programme of capital investment in infrastructure to boost jobs and growth.
“The Eurozone crisis is a challenge for all of us – but it’s not an excuse for the UK Government’s own failed economic policies. The double-dip recession is a direct result of a fall in output in the construction industry – at a time when the Scottish Government has consistently called for capital investment in ‘shovel-ready’ projects.
“We also need action on the high cost of fuel which is hammering businesses and families across the UK. The Chancellor should get behind the cross-party campaign led by the SNP and scrap the 3 pence fuel duty hike planned for August.”