Cheaper oil helps narrow UK trade gap in November

LONDON (Reuters) - Britain’s trade deficit with the rest of the world narrowed in November as cheaper oil prices reduced the cost of imports, helping to offset a record goods trade deficit with other European Union countries.

The largest container ship in world, CSCL Globe, docks during its maiden voyage, at the port of Felixstowe in south east England, January 7, 2015. REUTERS/Toby Melville

The Office for National Statistics said Britain’s total trade deficit narrowed to 3.170 billion pounds in November from an 3.507 billion pounds in October.

The deficit in goods alone narrowed to 10.642 billion pounds from 11.203 billion pounds, roughly in line with the average forecast in a Reuters poll of economists of 10.5 billion pounds.

Britain’s economy has recovered strongly over the past two years, but it has often struggled to export abroad and Friday’s data showed little change to this underlying pattern.

A survey from the British Chambers of Commerce published on Thursday showed that manufacturing exports stagnated in late 2015 for the first time since 2009, and that services export growth also slowed.

The main driver of the narrower goods trade deficit in November was a sharp fall in Britain’s net cost of oil imports to a six-month low of 560 million pounds in November from 1.087 billion pounds in October, the ONS said.

By contrast, Britain’s deficit in goods with its EU partners rose to 8.192 billion pounds, the highest since records began in 1998, after record imports of cars. Britain’s motor industry trade body said on Thursday that a record number of new cars were registered in Britain last year.

Figures last month showed the overall trade deficit lopped 1 percentage point off quarterly economic growth in the third quarter of this year, contributing to a disappointing overall expansion in gross domestic product of just 0.4 percent.

Chancellor George Osborne has warned that the economy faces a “dangerous cocktail” of risks from overseas in 2016, as growth slows in major emerging markets, stock markets tumble and a slump in oil prices reduces demand from oil-exporting nations.

Sterling strength acted as another headwind to exports for much of 2015. But on Thursday the pound touched its lowest level since May 2015 against a basket of currencies of its main trading partners =GBP.

Furthermore, oil prices have hit their lowest in nearly 12 years, something that is likely to help its trade deficit narrow further in future months.

Britain’s trade data is volatile on a monthly basis, and the ONS said that in the three months to November, the volume of exports was up 0.6 percent, the biggest rise since August while imports were up 0.5 percent, the smallest rise since July.

Reporting by David Milliken and Ana Nicolaci da Costa