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UK trade deficit widens

The UK trade deficit in September widened to £7.2 billion from £6.1 billion the previous month. This has surprised analysts somewhat when you consider the ongoing weakness in the pound and the fact that many people had expected imports to increase dramatically and reduce the trade deficit. However, it looks as though demand for new cars in the UK, as a consequence of the car scrapping scheme, has pushed demand to record levels with the vast majority imported into the UK.

The details of the figure, from the Office for National Statistics, show that imports rose by 7.5% between August and September to £19.4 billion while exports increased by just 3.9% to £26.6 billion. Once the UK car scrappage scheme comes to an end we can probably expect imports to fall and if the UK pound is still trading at relatively low levels we can probably expect exports to increase. However, as we have seen over the last few months, nothing is certain in the UK and the UK economy seems very much to have a mind of its own at the moment!

On the downside, many analysts believe that the widening trade deficit could impact upon economic growth in the UK in the short term and see estimates reduced for the remainder of 2009 and possibly early 2010.

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