Trade deficit narrowed for the third month in a row in June 2023
Monthly ONS trade data released today shows the trade deficit in goods and services narrowed for the third month in a row in June 2023.
While the UK’s trade balance still remained in negative territory, the change is because firms imported a little bit less and exported a little bit more: the value of goods imports decreased by 5.8% while that of exports increased by 1.8%.
This was driven by a large fall of imports in fuel as a result of lower gas prices in June, and a 3.8% increase in exports to non-EU countries, primarily machinery and transport equipment. However, EU exports remained constant, with increases in machinery and transport, and chemicals being offset by a dip in fuels exports.
In terms of services, both imports and exports remained quite stable. While financial services reported strong output, consumer-facing industries like restaurants, travel and leisure slowed.
Our own data for June suggests businesses are expecting growth in their exports over the next 12 months. In June 2023, 29% of all IoD exporters expected their levels of exports to increase in the next year compared to 16% who expected exports to fall. This gives a net positive result of +13.
June’s data also showed a significant difference between SMEs (net +12) and large firms (net +19). Similarly net expected growth in goods exports (+27) was much higher than that of services exports (+5).
Our data for July paints a more positive picture for exports, with net expected growth increasing to +20: 32% of exporters expected growth compared to 12% which expected a decline.
Taking the ONS data together with our own, there does seem to be appetite for export growth. However more needs to be done to encourage particularly smaller firms to export to the EU, the UK’s closest and largest trading partner.