The FINANCIAL — The U.K.’s trade deficit widened again in June as a strong pound continues to hamper exports by British companies, but trade still made a positive contribution to the economy in the second quarter overall, official data show.
The gap between the value of goods and services the U.K. sold abroad and what it bought was 1.6 billion pounds ($2.5 billion) during the month, the Office for National Statistics said Friday. The deficit grew larger after narrowing to GBP885 million in May, the lowest in almost two years, both because exports fell and imports edged higher, according to Nasdaq.
Although the deficit widened in June, its significant narrowing in April and May still allow for trade to have made a positive contribution to economic growth during the second quarter, the ONS said. British gross domestic product expanded at a quarterly 0.7% between April and June, compared with a slower 0.4% in the first quarter.
Trade was a strong hindrance for GDP in the first months of 2015, but these recent figures lift the prospects of the British economy for the remainder of the year.
Nevertheless, a growing amount of business surveys underscore that companies in the U.K. continue to face large hurdles to sell overseas, mostly due to the strength of the pound against other major currencies.
Weak exports mean the U.K. economy is more reliant on its own consumers in order to fuel growth, which is why the British government has pledged to boost sales abroad. In 2012, U.K. Treasury Chief George Osborne unveiled a plan to double exports to an annual GBP1 trillion by 2020, by providing government support and encouraging firms to open new markets. But official data show numbers have barely budged ever since.
In a report released Monday, the British Chambers of Commerce–which represents more than 90,000 businesses in the U.K.–highlighted that, at the current rates of export growth, the GBP1 trillion target wouldn’t be reached until 2034.
“That we are set to miss the export target by 14 years tells us that the radical shift needed has not happened,” said John Longworth, director general of the BCC, who pointed out British companies “need ongoing support and access to finance to help them thrive on the world stage.”
The greatest barriers to exporting among services firms–a sector in which Britain remains a net exporter–were differences in regulations and standards, as well as language or cultural differences, the BCC survey found.
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