UK exports hit record highs of £25.5 billion in August in a rare bright spot for the British economy.
Weaker domestic demand and increasing exports of fuel, intermediate goods and food, drink and tobacco saw the UK’s trade balance narrowed by £1.4 billion to £7.8 billion. With UK consumers buying less - as evidenced by weaker retail figures released on Tuesday - and a slowing economic recovery have dampened consumption of oil as well as imports of chemicals.
The ongoing economic crisis in the eurozone, and a growing consensus that the single currency area will slide back into recession, had led analysts to predict that UK exports would be hit.
Calling for a concerted drive from the government to promote exports, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“It is encouraging that, even in a difficult international environment, Britain is able to strengthen its trading position.
“The figures provide a welcome contrast to the steady flow of negative news we have recently,” Kern said. “However we cannot underestimate the challenges ahead for exporters, particularly in the face of the serious problems facing the eurozone, which remains our major trading partner. As the fiscal austerity plan dampens domestic demand, net exports have to be the main engine of Britain’s economic recovery.
Howard Archer, chief UK and European economist at IHS Global Insight, warned that the surge could be temporary. “UK exports are particularly vulnerable to weaker Eurozone economic activity and there is now a very real risk that the eurozone could be sinking back into recession amid the heightened sovereign debt crisis,” he said. “Worryingly, the September UK manufacturing purchasing managers’ survey indicated that export orders contracted for a second successive month in September, and at the fastest rate since May 2009.”