[A-List] UK economy: record trade deficit

["Michael Keaney" <michael.keaney@xxxxxx>]

Trade gap worst since records began - and then William of Orange was king

Deficit of £34.3bn and business sees no sign of improvement

Heather Stewart
Tuesday February 11, 2003
The Guardian

Britain last year notched up its worst trade deficit since records began in
1697, as falling demand from the struggling global economy squeezed exports.

The trade gap expanded to an unprecedented £34.3bn in 2002, according to
official figures released yesterday, as recession-hit manufacturers cut
output and laid off workers to cope with falling orders.

Although statisticians said the trade picture improved slightly in December,
opposition spokesmen and business groups seized on the data to question the
health of the economy, and raise the pressure on the chancellor, Gordon
Brown.

"The 2002 trade figures are yet another damaging addition to this
government's downgraded economic reputation," said shadow trade secretary,
Tim Yeo.

The Liberal Democrats' spokesman, Matthew Taylor, accused the chancellor of
being "in denial" about the true state of the economy. "It's time [he] took
a reality check and recognised his policies have seen British productivity
falling behind and British business struggling," he said.

Mr Brown was forced to defend his handling of the economy at the weekend,
after the Bank of England shocked the City last Thursday with an emergency
quarter-point cut in interest rates to keep growth on track.

With the Treasury relying on a recovery in investment to rebalance the
economy in the coming months, David Frost, director general of the British
Chambers of Commerce, last night called for action from the chancellor to
rejuvenate British business.

"The UK economy is obviously losing its competitive edge in the
international marketplace," he warned. "The government must act to prevent
this situation from slipping any further and then work hard to reverse the
trend."

As eurozone economies scored only anaemic growth, and the US fought to shake
off the after-effects of the collapse of the dot.com boom, demand in all
Britain's major export markets was weak in 2002. Statisticians said total
exports were down 2.5% year on year, with those to non-EU countries falling
by 4.5%.

Imports also fell, but only by 1.5%, as robust consumer demand - fuelled by
the booming housing market - continued to suck in goods.

The British Retail Consortium said its members were "haunted by cost fears",
despite scoring a 6.8% annual increase in sales in January.

Recession-hit manufacturers are also facing damaging cost pressures,
according to official producer prices figures, also released yesterday.

A 0.4% increase in factory gate prices in January was outpaced by a 0.8%
rise in the cost of manufacturers' materials.

"Manufacturers' profits remain under pressure," said Simon Rubinsohn, chief
economist at City brokers Gerrard.

He added: "This indicates that further job losses are likely and provides
little reason to expect any rebound in capital spending in the near term."