U.K.'s visible trade deficit widened significantly in January to the highest level since August 2008 due to a sharp fall in exports.
The deficit on trade in goods increased sharply to GBP 8 billion in January, data from the Office for National Statistics showed Tuesday. The deficit for December stood at GBP 7 billion, revised from the initial estimate of GBP 7.3 billion. Consensus forecast was for a shortfall of GBP 7 billion.
Total exports dropped 6.9% month-on-month to GBP 19.5 billion and total imports fell 1.6% to GBP 27.4 billion. Car imports in January fell GBP 215 million.
The much required pick-up in the external sector is still not in evidence, Capital Economics' economist Vicky Redwood said. According to recent surveys, export orders are rising. "But there is clearly a big question mark over whether any improvement in net trade will come through quickly or strongly enough to offset the weakness in domestic demand," the economist said.
The balance of trade in goods with EU nations narrowed to GBP 3.2 billion from GBP 3.6 billion, while the shortfall with non-EU nations increased to GBP 4.8 billion from GBP 3.4 billion.
The seasonally adjusted surplus on trade in services was GBP 4.2 billion in January, compared with the surplus of GBP 4.4 billion in December. Rising visible trade deficit fully offset the surplus on trade in services in January.
Consequently, total trade including both trade in goods and services showed a deficit of GBP 3.8 billion in January, larger than the GBP 2.6 billion shortfall in December. Total trade deficit was larger than the consensus forecast of GBP 3 billion.
According to Colin Ellis, an economist at Daiwa Capital Markets Europe, there is no sign of the U.K. transforming into an export-led economy any time soon. It is likely to reflect the fact that U.K. exporters are more likely to be price-takers than price-setters, implying that sterling's decline might have boosted margins and profitability, the economist noted.
Ellis expects higher margins to still benefit the UK economy, but any impact on growth to take longer to show up. In terms of GDP during 2010, it is increasingly possible that net trade may not provide that much impetus to growth, the economist said.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.