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Export figures fall casting UK recovery doubt

UK exports fell in February, official figures have revealed, underlining the continuing lack of balance in the economic recovery.

BUSINESS SLOW: Weak demand for UK exports in the eurozone has led to concerns over the nation's trade deficit.
BUSINESS SLOW: Weak demand for UK exports in the eurozone has led to concerns over the nation's trade deficit.

Seasonally-adjusted data, published yesterday by the Office for National Statistics, showed that UK exports fell by 0.9% from £40.97 billion in January to £40.59bn in February. They had come in at £42.43bn in December.

February's fall in exports reflected in large part weakness in European Union market-places. UK exports to other EU countries fell from £12.01bn in January to £11.67bn in February.

The UK's global trade deficit narrowed from £2.2bn in January to £2.06bn in February, but only because the fall in imports exceeded the drop in exports.

Imports fell by 1.2%, from £43.17bn in January to £42.65bn in February.

The unbalanced nature of the UK economic recovery has been highlighted by Bank of England Governor Mark Carney.

Earlier this week, British Chambers of Commerce chief economist David Kern warned that UK growth was still unduly reliant on consumer spending, driven by a buoyant housing market and a falling savings ratio.

He added that, unless investment and net exports could make a bigger contribution to growth, there was a risk that the recovery would stall.

The housing market has been fuelled by policies introduced by the UK Government last year, after Chancellor George Osborne's vision of "a Britain carried aloft by the march of the makers", set out in his March 2011 Budget, failed to materialise.

Samuel Tombs, UK economist at consultancy Capital Economics, said: "February's trade figures showed that the economy is still struggling to rebalance towards exports. And in the coming years, progress is likely to be slow at best while demand in the eurozone remains weak."

He added: "Admittedly, the overall trade deficit narrowed from £2.2bn in January to £2.1bn, slightly less than last year's monthly average of £2.2bn. But this narrowing entirely reflected a 1.2% monthly fall in the value of imports, which was largely due to a fall in imports of erratic goods."

Mr Tombs declared that the UK's goods exports in February were lower than in any month since October 2010. UK goods exports dropped from £23.93bn in January to £23.55bn in February.

On a more positive note, the UK's trade deficit in January was revised in yesterday's figures from nearly £2.6bn to £2.2bn.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The good news is that the trade deficit narrowed to £2.1bn in February, while the January deficit was revised down appreciably. The not-so-good news is that the trade deficit narrowed in February because imports fell more than exports.

He added: "Looking through the distortions, the export performance looks disappointingly soft... Net trade will likely struggle to make a sustained, significant positive contribution to UK growth in the near term at least."

And economists believe it likely that net trade will have been a drag on UK gross domestic product in the first quarter.

Mr Archer said: "It looks likely that net trade will have been a modest drag on GDP growth in the first quarter of 2014, having made a markedly positive contribution in the fourth quarter of 2013 largely due to December's very small deficit."

Mr Tombs said: "February's overall deficit suggests that net trade may have made a negative contribution to GDP growth in the first quarter.

"Weak demand for UK exports in the eurozone remains chiefly responsible for the persistence of a very large trade deficit... As long as demand in the UK's main Continental export markets remains weak, the economy is likely to struggle to rebalance towards exports. For now, then, the UK's economic recovery is likely to remain largely a domestic affair."

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