UK trade deficit hits record £28bn as business with Russia plummets

Total trade in the UK fell by 2.1% in June. Photo: Reuters/Toby Melville

Britain’s trade deficit has widened to a new record £27.9bn ($33,9bn) in the biggest jump in 25 years, fuelled by soaring energy costs that have been exacerbated by Russia’s war in Ukraine.

The latest figures from the Office for National Statistics (ONS) showed that the gap between the value of exports and imports expanded at the biggest rate since 1997.

UK imports were up by £14.3bn to reach £206.6bn in the second quarter, while exports increased by £12.3bn to £178.6bn.

Read more: UK economy shrinks as stagflation looms

Total trade — exports + imports — fell by 2.1% in June That was driven by a 8% decline in exports, largely to outside the European Union.

Removing the effect of price rises, the total trade deficit, excluding precious metals, narrowed by £2.4bn to £22.6bn in the second quarter, the figures showed.

That was 4.5% of gross domestic product (GDP) — the value of all the goods the economy produces.

Services trade grew during the month, but import growth outpaced exports in June, according to the data.

Machinery and transport equipment imports from the EU in Q2 reached £3.4bn, leading the growth, and offsetting a rise in exports of chemicals and medicinal and pharmaceutical products to the bloc. It added jewellery exports fell, notably to Switzerland and Qatar.

UK trade deficit. Chart: Office for National Statistics

Despite the Russian invasion of Ukraine, the ONS found overall UK imports from the Kremlin were the lowest since records started in January 1997 as sanctions wiped out fuel imports.

Imports of fuels, a historically important commodity for trade with Russia, reached zero in June 2022. And the total value of monthly imports were at £33m, down from around £1.8bn in January and February.

In March, the UK government said it would phase out the import of Russian oil and oil products by the end of 2022 after the Ukraine crisis.

Samuel Tombs, chief UK economist, at Pantheon Macroeconomics warned while the trade data was “grim” things will likely get “worse” in the coming months.

“All told, the trade data are grim, and will worsen further over the coming months, leaving sterling even more vulnerable than usual to any reduction in the willingness of overseas investors to supply the finance needed to sustain this excessive consumption,” he said.

Read more: Russian oil production to fall by a fifth after EU ban, IEA says

The figures came hot on the heels of GDP data, which showed the size of the UK economy shrank in the second quarter as consumers’ spending power took a hit from soaring inflation and the cost of living crisis.

GDP fell 0.1% between April and June, turning around from a 0.8% gain in the previous quarter.

The end of the contribution to the data from the NHS’s Test and Trace programme for COVID was said to be the biggest contributor as human and health services fell 5.4%.

Economists were expecting a bigger decline and the Bank of England has forecast the economy to tip into recession at the end of the year, lasting up to 2024.

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