Widening trade deficit could act as a roadblock in the road to recovery

Written by Kunal Sawhney, CEO, Kalkine Media

The economy of the United Kingdom has faced severe doldrums in the recent past, following the wide-ranging consequences of the coronavirus pandemic coupled with the disruption in cross-border trade after the introduction of an all-new arrangement with the European Union.

The UK-based exporters have continued to face Brexit-led difficulties and the perplexities that came across after the termination of the transition period.

The UK trade deficit in the month of June 2021 widened to GBP 2.5 billion from a level below GBP 0.2 billion in May. According to the data publicised by the Office for National Statistics (ONS), this has been the largest shortfall since December of 2020.

The businesses and industries are looking forward to a meaningful recovery in the commercial operations following the relaxations provided by the Downing Street administration. An unforeseen trade balance can lead to further disruptions as the exporters and manufacturers are still recovering from the pandemic-laden stress and adversities of ‘pingdemic’ chaos.

Excluding precious metals, the net exports from the UK dropped 2.2% in the month of June 2021. The drop was largely driven by a slide in the exports to the non-EU countries, de-growth in exports of cars, medicinal and pharmaceutical products.

On the other hand, the total exports to the EU region jumped to pre-Brexit levels in May and June. Cumulatively, the net exports to European Union jumped by GBP 1.4 billion to GBP 14.3 billion in June of 2021.

On the contrary, the net quantum of imports increased 2.6% in June, followed by 2.7% and 2.5% increases in imports from EU and non-EU jurisdictions, respectively.

On a sequential basis, the total exports of goods surged by 12.5% in the April-June quarter of the present calendar year as compared to the net exports in Q1 2021. A large part of the rise in exports has been due to an increase in exports to the EU countries.

Strikingly, the net trade deficit broadened to GBP 5.2 billion in the corresponding duration from just GBP 1.6 billion at the end of Q1. This doesn’t account for the exports of precious metals.
International trade has remained highly volatile, especially in the last two years following the developments around the prospective Brexit arrangement between the Downing Street administration and the EU counterparts. The emergence of the pandemic and the catastrophic aftermath of Covid-19 has amplified the troubles for the country.

Nevertheless, the UK has somehow managed to contain the losses on account of international trade by raising the awareness amidst the conventional exporters, alongside gradually increasing the overseas channels through which the volume of exports can be amplified in the upcoming quarters.

In the month of June, the fall in total exports of goods was largely steered by the tumbling export volume to the non-EU countries. Notably, the exports volume to the EU region surpassed the total volume of exports to the non-EU countries in May 2021, and it continued to remain higher in June.

About Lisa Baker, Editor 765 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.