The U.K. economy received no help from its international trade performance in the first quarter, official figures published on Tuesday suggest.
The deficit widened to 13.3 billion pounds ($19 billion), the most since the start of 2008, from 12.2 billion pounds in the fourth quarter of 2015, the Office for National Statistics said. The shortfall in goods alone was the widest since records began in 1998.
The figures reinforce a picture of an economy being driven by domestic spending, with net trade set to act as a drag on growth for a third quarter in a row.
Growth slowed in the first quarter and recent surveys point to a further loss of momentum as uncertainly grips consumers and businesses ahead of the referendum on Britain’s European Union membership.
A second estimate of gross domestic product will be published on May 26, revealing the contributions from exporters, consumers, business investment and government spending. Samuel Tombs, an economist at Pantheon Macroeconomics in London, estimates that net trade subtracted about 0.3 percentage point from growth in the first quarter. “This does not imply that the preliminary GDP estimate will be revised down later this month, but it does underline that the recovery is struggling on all fronts,” he said.
In March, the total trade deficit narrowed to 3.8 billion pounds. For goods, the gap was little changed at 11.2 billion pounds, leaving the quarterly deficit at 34.7 billion pounds.
Tuesday’s figures offered something for both sides in the EU referendum campaign. Britain is less reliant on the EU than it was. Shipments of goods to the 28-nation bloc have fallen by almost a fifth over the past four years and now account for 47 percent of total exports compared with 54 percent in 2011. In the first quarter, the trade deficit with the EU widened to a record 23.9 billion pounds.
By contrast, exports to non-EU countries have grown by 6 percent, providing ammunition to those who say Britain can thrive outside the EU single market by targeting fast-growing economies such as India. Separate figures highlighted the weakness of demand in Europe, with industrial production falling in both Germany and France, the two largest euro-region economies.
Still, the EU remains the biggest market for British exporters, which sell three times more to its member states than they do to the U.S. A British Chambers of Commerce survey on Tuesday found that six in 10 exporters favour staying in the European Union.
Britain’s growth forecast cut
as Niesr issues Brexit warning
The U.K. economy will grow less this year than previously estimated and a vote to leave the European Union would send sterling tumbling and further damage the outlook, the National Institute of Economic and Social Research said.
In a report published in London on Tuesday, Niesr said a Brexit in the June 23 referendum would cut 2017 GDP by about 0.8 percentage point. It also lowered its 2016 projection to 2 percent from 2.3 percent.
“A vote to leave the EU would represent a significant shock to the U.K. economy,” Niesr said. “This shock would be likely to manifest itself through a number of channels, some of which might be expected to be relatively short-lived, predominantly affecting the near-term outlook.”
Warnings about the impact of a Brexit have been coming in force this week, with Chancellor of the Exchequer George Osborne saying people would be worse off and Prime Minister David Cameron saying a split would jeopardize peace in Europe.