UK trade gap widens as exporters suffer
The UK trade deficit increased during June to £6.5 billion against £6.2 billion in May, a move which was unexpected. Many people had forecast the gap to remain fairly stable at around £6.2 and even though exports rose by 1.4%, imports rose by a larger 2.2%. The UK currency had initially suffered a massive decline against the likes of the dollar and the Euro in the early days of the recession but just lately the majority of the fall has been eliminated.
While it was inevitable that at some stage the UK currency would improve, there had been hopes that a weaker sterling would assist exporters in the UK and ultimately pull the UK economy out of recession. However, the news that imports are still outstripping exports is positive for the wider economy and the bad news for exporters. It seems to indicate that even though sterling denominated pricing will have fallen compared to two years ago, it does not appear to have fallen enough to put the export industry on a more stable footing.
However, just last week the Bank of England suggested that the UK export industry was more stable than at any time over the last two years and ultimately a perceived weakness in this area was potentially caused by weak economies overseas. As the UK, and other countries of the world, move out of recession the situation should become clearer.
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