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UK trade gap narrows in November

Figures from the Office for National Statistics show that the UK trade gap with the rest of the world narrowed from £7 billion in October to £6.8 billion in November. Analysts had been expecting a figure of around £7 billion so the reduction in the gap has been well received. But what does this mean for the UK economy?

It is interesting to see that exports increased by 0.1% during November while imports fell by 0.8%. This illustrates the ongoing weakness of the UK currency which is making goods exported from the UK cheaper for many of our trading partners. On the flipside of the coin, the weakness of sterling is making imports more expensive hence the reason why we saw a significant drop. There are hopes that at least a continuation of the short-term weakness in sterling will further assist exporters and reduce potential inflation busting imports.

Ironically, as the UK economy recovers and the UK government gains a firm grip of UK finances we will likely see a recovery in the exchange rate of sterling which will negate the benefits exporters are feeling at the moment and encourage more imports. In some ways, at least in the short term, we have a win-win situation and a potential lose-lose situation just around the corner.

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