The trade deficit of the United Kingdom fell in November mainly due to a fall in oil prices making a large part of the country’s imports substantially cheaper. This is great news for the strengthening economy as it finds itself on firmer footing to move forward.
The trade deficit fell from £2.2 billion in October 2014 to £1.4 billion in November Office for National Statistics (ONS) with most of that £1.1 billion fall in imports of which £0.7 billion was from the lower cost of oil coming into the country. This can largely be attributed to the price of Brent Crude dropping by around 50% in price since August 2014 due to oversupply as more and more American oil finds its way onto the global market after innovations in the field of fracking. Slowing demand in China has also added to this.
It wasn’t all just down to a drop in the cost of imports however as £0.7 billion of that margin that was made up came from exports and the £8.8bn deficit in goods in the country was partly offset by its £7.4bn surplus in the supply of services.
Other ONS figures also showed the construction and manufacturing and industrial output within the country eased off in November but this was partially down to a 5% fall in oil and gas output in the month as maintenance work in the North Sea took place in November. The narrower measure of manufacturing output rose by 0.7% compared with October, and was up 2.7% from November last year.
David Kern, chief economist at the British Chambers of Commerce said of these figures:
“The UK faces a national challenge when it comes to trading the world. The Monetary Policy Committee must persevere with low interest rates for most of this year and we need to redouble our efforts to place exports at the heart of businesses’ growth strategy if we are to achieve the government’s export target and rebalance the economy.”
As the country moves forward economically, and one of the fastest growing economies in the developed world, the United kingdom is of major interest to investors and the news that the deficit has become narrower will be music to the Chancellor of the Exchequer’s, George Osborne, ears although a greater focus needs to be placed on exports in order to maintain this momentum and it will now be his job to encourage that.
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