More bad economic news for the government
David Blackburn 11:25am
Presently, the waves of bad news are as relentless as biblical plagues. The latest trade figures show that Britain’s trade gap opened in December; the seasonally adjusted deficit stood at £9.2bn, a rise from £8.5bn in November.
There are plenty of explanations as to why the export-led recovery failed to jump customs, despite the comparatively weak pound. The various acts of God couldn’t have helped and the continuing financial crisis on the continent will have further eroded demand.
However, the government will realise that these figures indict its growth strategy. As the ONS graph below indicates, the trade deficit is a persistent problem and one feared by the British Chambers of Commerce.
In addition to further liberalising Europe and redressing domestic regulatory impediments, it is vital that Britain develops deeper and closer relationships with alternative markets to the European Union, upon which we are too dependent. The government has been proactive: moulding an entirely self-interested foreign policy to the interests of exporters, and today’s Trade White Paper will elaborate on these plans. But, in the final summation, success is measured by numbers, and they are heading in the wrong direction at the moment.
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Rhoda Klapp
February 9th, 2011 11:50am Report this commentBut DB, your editor wants to raise rates, which will put up the pound and sink the exporters, while killing domestic demand stone dead. Do you talk to each other, at all?
Publius
February 9th, 2011 12:12pm Report this comment"the waves of bad news are as relentless as biblical plagues"
That's probably because you're reading the Spectator blog and the Telegraph, both of which seem determined to bring down the gov't.
I don't recall that either was nearly as critical of Labour and the adored Blair.
Actually, there has been some goodish economic news lately, given the circumstances the gov't inherited.
denis cooper
February 9th, 2011 1:22pm Report this commentI'm not sure that much of the blame for a widening trade deficit can be put on the weather, which would affect trade in goods in both directions.
denis cooper
February 9th, 2011 1:28pm Report this commentNeither should one expect any substantial short term changes in the balance of trade due to changes in the external exchange rate sterling, because the trade weighted sterling index has actually been pretty stable for the last two years now.
Scott
February 9th, 2011 1:38pm Report this commentcouldn't the increased trade inbalance be due to the fact that demand for goods has increased because economic activity has picked up! Our manufacturering industry has never been good at producing what we want, so when we do we have to import. But then I'm no economist.
michael
February 9th, 2011 2:06pm Report this comment"Affect trade in both directions"...can't get in can't get out. December trading was dire - even those who do well out of the cold were unable to capitalise properly. Except plumbers.
David Bouvier
February 9th, 2011 2:47pm Report this commentOf course, it is well known that the world as a whole runs a net trade deficit (where with no-one knows)
daniel maris
February 9th, 2011 4:22pm Report this commentPublius assures us there is good economic news, but chooses to keep it to himself.
I agree these trade figures are not in themselves very indicative of overall performance - but the "direction of travel" as they say might be.
Cynic
February 9th, 2011 8:49pm Report this comment"it is vital that Britain develops deeper and closer relationships with alternative markets to the European Union, upon which we are too dependent." I couldn't agree more. In fact, we should free ourselves entirely from the grip of the EU, especially its restrictive regulations.
NM
February 10th, 2011 3:21am Report this commentAlternatively, how about starting to produce things that people actually want to buy, and supporting manufacturing? Building trade links is all very well, but unless you've got something to sell it feels a bit cart-before-horse. A good start could be to provide Forgemaster's with the public-private matching loans Labour had offered. And please don't trot out that old canard, that industrial policy is destined to failure by definition - because in fact it isn't. That British industrial policy in the 60s and 70s was a miserable failure, I grant you. But since plenty of other countries have showed themselves able to run effective industrial policies that fostered internationally competitive enterprises (Japan, South Korea, Taiwan, France, Germany) it might be worth pondering whether it was something specific about British industrial policies and institutions that destined these to failure, rather industrial policy per se.
daniel maris
February 10th, 2011 8:38am Report this commentThere was a good article in The Independent about the difficulties of rebalancing towards manufacturing, which I think we have to take seriously. German companies operate at a much bigger level and so benefit from a host of economies of scale denied British companies. That probably reflects their central position in the European hinterland with maybe close on 300million people within easy reach.
There may be limits to what we can do so long as we remain part of the EU. Britain like Japan, an off-continent island, is really a natural "world trader".
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