Largest trade gap on record
Nigel Williams, 14 November 2013
‘This is the largest trade gap on record’ was the blunt comment in a statistical release about overseas trade from HM Revenue and Customs on Tuesday (12th November 2013). The manner of reporting can make it seem smaller. Deficits are reported monthly, so seem less eye-wateringly huge when compared with national totals on an annual or even quarterly basis. It’s a method long understood by marketers selling television subscriptions or telephone contracts, hoping the customers will not mind that the same bill will recur every single month. Spending £6.8 billion more than we sell is bad enough even without having to multiply it by twelve.
The other consequence of monthly reporting is that seasonal fluctuations are possible. Trade with the EU in both directions typically drops temporarily in the months of December, April and August, notably in the categories of machinery and transport equipment, chemicals and those manufactures that are classified by their material. A September figure can therefore look especially serious if compared to the single preceding month.
A longer-term comparison reveals the full scale of the trade gap.
£billion (000,000,000) current prices
2002
2012
2013 (January to September)
-9.9
-20.0
-16.3
0.7
1.1
1.2
-3.3
-1.9
-2.6
5.6
-18.8
-12.8
-0.3
-0.9
-0.6
3.5
2.2
0.3
-8.2
-18.7
-11.8
-13.3
-26.4
-21.9
-15.8
-24.8
-18.4
-11.7
-1.5
-0.4
-52.7
-109.8
-83.3
(Source: author’s calculations from HMRC statistical database)
The biggest success story is artificial, in that commodities and transactions not elsewhere classified, which formed a large deficit in 2002, have been successfully classified elsewhere in many cases, and more for imports than for exports. Exports of drink and tobacco have maintained a surplus. Other sectors are sending all the wrong signals. Unless the last quarter of 2013 delivers spectacular improvements, chemicals have changed from a large surplus in 2002 to a small one. Oil has gone from a large surplus in 2002 to an even larger deficit, and miscellaneous manufactures and transport equipment have deteriorated for a large deficit to a worse one. That is where figures for cars are reported. The last few months of imports of cars from the EU have shown a rapid worsening. September’s ‘arrivals’ – HMRC gives EU imports a different name from those from elsewhere – for the category including cars were £1.6 billion greater than a year before. The deficit for the sector was £3.8 billion, in just one month. There may be a case for some seasonal adjustment but that deficit is too rough to disappear in the smoothing.
It seems like stating the obvious, but a recovery that suggests we can afford more new cars would be a whole lot healthier if we could make them ourselves first.