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News

posted 9 Mar 2010

People & places

UK exports plunge in January despite falling pound

UK exports fell by £1.4bn ($2.1bn) – 6.9% – to £19.5bn ($29.15bn) in a surprise month-on-month fall from December 2009. The fall in exports is all the more surprising in view of the devaluation of the pound by between 25% and 35% against major currencies since the start of the global financial crisis.  

The decline in exports outstripped a 1.6% decline in imports, widening the UK’s trade deficit from £7bn ($10.5bn) to £8bn ($12bn) in January, its biggest level since August 2008, despite expectations that the trade deficit ought to narrow due to the effect of the lower value of the pound.  

Exports to the US were worst affected, falling by £500m ($747.3m).  

Some economists suggested that export performance might have been affected by disruption caused by snow. Central and local government had been heavily criticised for failing to prepare properly for the bad weather and these figures may put a big cost their failure to plan accordingly.  

The fall in exports coincided with a shock budget deficit for January 2010, the month in which payments for the previous financial year are expected to be made – and, hence, the one month of the year in which a budget surplus can normally be expected.  

Ratings agency Fitch has also reiterated its concerns over the state of government finances – the country is heading for a £175bn ($261.5bn) deficit in the financial year to the end of March, equal to about 13% of the UK’s gross domestic product.  

Unless export performance improves, the UK is doomed to a double-dip recession – possibly a depression – as government will be forced to sharply cut back spending after the election, due by May 2010 at the latest, and over-leveraged consumers are forced to pay back years of over-spending on credit cards and mortgages.