The UK’s goods trade deficit with the EU has jumped to a record high prior to the referendum regarding the country’s membership of the bloc. According to the Office for National Statistics, the gap for the first quarter of 2016 increased to £13.3bn – £1.1bn more than the last three months of 2015 and an eight-year high. The amount by which goods imported from the EU exceeds goods exported to it has reached the highest level ever recorded in March– up to £8.1bn. In contrast, the UK’s overall trade deficit, both with EU and non-EU trading partners, shrunk to £3.8bn last month.
Capital Economics analyst Scott Bowman said: “External demand doesn’t appear to be providing any support to the recovery and is compounding the domestic uncertainty created by the upcoming EU referendum.” Advocates of leaving the EU frequently outline the size of the UK’s trade deficit with the EU as an important reason to believe that British negotiators would enjoy strong leverage in talks following potential Brexit. Nevertheless, critics believe that the UK is more dependent on the union for its exports than the EU is on Britain for trade.
“Whereas the UK earns 15pc of its GDP through exports to the EU, the rest of the EU earns less than 5pc of its GDP through its exports to the UK.” said Kallum Pickering, a Berenberg economist. “In all post-Brexit negotiations, the bargaining position of the EU would be much stronger than that of the UK. The EU could use that to restrict UK access to the EU market for services, or to grant such access only if the UK complies with tougher regulations for financial and other services than before.”
Meanwhile, economic growth has already slowed to 0.4% in the first quarter, while analysts say that the figures are another evidence of the weight of global economic weakness on the UK. “A truly horrible first quarter trade performance that clearly weighed down on GDP growth”, said Howard Archer from IHS Global Insight.