The UK trade deficit widened in December just as it did in the US. The gap between exports and imports increased to £13.6 billion ($18.8 US). Much of this was caused by oil price increases and an increased volume of imports. This figure, published by the Office of National Statistics (ONS), is higher than was estimated by the majority of analysts.
UK Industrial Output Falls
Not only that, but UK industrial output fell by 1.3% in December compared to November. This is in spite of the UK’s manufacturing industries coming up with an increase in output of 0.3% for December. In fact, this figure means that the UK manufacturing sector has been increasing in output for eight consecutive months. This is the longest run of continuous output increases for nearly 30 years.
UK Trade Deficit Widened by Increased Crude Oil Imports
One of the major reasons for the drop in UK industrial output was the closure of the Forties North Sea oil pipeline for a significant part of December. In fact, mining and quarrying provided the only significant downward contribution in December, falling by 19.1% in total. Increased crude oil imports were the result, and that plus rising crude prices led to a widening of the headline trade deficit.
UK construction output increased by 1.6% in December, making up for a reduction throughout the earlier part of the year. The major construction projects that helped the UK economy were related to house building and general infrastructure. Trade, however, was and still is an issue for the UK.
Imports Contribute to UK Trade Deficit
A major issue and one that is contributing significantly to the UK trade deficit is that of imported goods. Even though imports have been increasing in price, it seems to have made little difference to their purchases. People in all social groups want the best cell phones and other imported goods with which UK manufacturers cannot compete. That being the case, improvements in UK production levels may have a limited influence on the balance of trade.
This is something that UK manufacturers should be considering, and for which answers are needed. Failure to do so could leave the UK in the doldrums of international trade. That said, it is still believed by many that GDP growth will not change much from the current position.