The UK is the 7th leading importer and the 11th leading exporter in the world. Accordingly, the UK holds a massive trade deficit with the rest of the world, second only to the US. In 2010, UK imports were worth US$546.5 billion with exports valued at only US$405.6 billion.
Despite recent attempts by the government to reduce the trade deficit, the latest data from UK’s Office of National Statistics points to an ever-widening trade gap. Since the beginning of 2011, UK’s monthly trade deficit has hit record levels of more than £4 billion per month. The monthly deficit in the UK for 2011 is also exceeding the previous record level of £3.5 billion per month reached in 2007.
Two commonly cited reasons for the UK’s record trade deficits have been its high inflation rate and budget deficit.
The high inflation rate has caused real depreciation of the Pound to be a lot smaller than the nominal depreciation. Furthermore pushing real interest rates below those of other countries has encouraged borrowing and discouraged savings – counteracting any little real depreciation.
The increase in UK’s budget deficit has also affected UK’s trade deficit. Therefore, the UK’s austerity plan to cut down public spending is necessary in order to reduce the trade deficit as well.
UK’s Import and Export Indicators and Statistics at a Glance (2010)
Total value of exports: US$405.6 billion
Primary exports - commodities: manufactured goods, fuels, chemicals; food, beverages, tobacco
Primary exports partners: US (14.71 percent), Germany (11.06 percent), France (8 percent), Netherlands (7.79 percent), Ireland (6.89 percent), Belgium (4.65 percent), Spain (4 percent)
Total value of imports: US$546.5 billion
Primary imports - commodities: manufactured goods, machinery, fuels; foodstuffs
Primary imports partners: Germany (12.87 percent), US (9.74 percent), China (8.88 percent), Netherlands (6.94 percent), France (6.64 percent), Belgium (4.86 percent), Norway (4.84 percent), Ireland (4.01 percent), Italy (3.99 percent)
Despite recent attempts by the government to reduce the trade deficit, the latest data from UK’s Office of National Statistics points to an ever-widening trade gap. Since the beginning of 2011, UK’s monthly trade deficit has hit record levels of more than £4 billion per month. The monthly deficit in the UK for 2011 is also exceeding the previous record level of £3.5 billion per month reached in 2007.
Two commonly cited reasons for the UK’s record trade deficits have been its high inflation rate and budget deficit.
The high inflation rate has caused real depreciation of the Pound to be a lot smaller than the nominal depreciation. Furthermore pushing real interest rates below those of other countries has encouraged borrowing and discouraged savings – counteracting any little real depreciation.
The increase in UK’s budget deficit has also affected UK’s trade deficit. Therefore, the UK’s austerity plan to cut down public spending is necessary in order to reduce the trade deficit as well.
UK’s Import and Export Indicators and Statistics at a Glance (2010)
Total value of exports: US$405.6 billion
Primary exports - commodities: manufactured goods, fuels, chemicals; food, beverages, tobacco
Primary exports partners: US (14.71 percent), Germany (11.06 percent), France (8 percent), Netherlands (7.79 percent), Ireland (6.89 percent), Belgium (4.65 percent), Spain (4 percent)
Total value of imports: US$546.5 billion
Primary imports - commodities: manufactured goods, machinery, fuels; foodstuffs
Primary imports partners: Germany (12.87 percent), US (9.74 percent), China (8.88 percent), Netherlands (6.94 percent), France (6.64 percent), Belgium (4.86 percent), Norway (4.84 percent), Ireland (4.01 percent), Italy (3.99 percent)
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