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July trade data steady, but shows cause for optimism

Wednesday’s ONS publication of UK trade statistics for July 2023 shows a broadly similar picture from previous months. However, within that there are some reasons for optimism.

In chained volume measures (CVM), which removes the effect of inflation, total goods exports rose by 2.1%. Exports to the EU increased by 4.4%, while non-EU exports remained steady. This rise was driven by exports of fuels (£0.4 billion), machinery and transport equipment (£0.2 billion), and partially offset by miscellaneous commodities (-£0.1 billion).

The situation for services is less positive than goods, however. In CVM, services exports have been stuck on £27.7 billion for four months in a row.

The ONS analysis shows the trade deficit widened in the three months up to July by £1.2 billion to £18.8 billion as a result of a rise in fuel imports, mainly crude oil and gas from Norway. Although, taking a longer term view, the total trade deficit has narrowed compared to the last months of 2022 and the first months of 2023:

Our own export data for July 2023 largely mirrors the ONS release. When asked to compare the last 12 months to the next in terms of outlook for exports, most firms are not expecting much movement, although some are a little more positive. Of those which export, 55% are anticipating no change to export levels, 27% are anticipating slight growth, and 8% slight decline. The overall results produce a net growth of 11%, up from 8% in June.

(IoD Policy Voice survey, August 2023)

It is positive to see an increase in goods exports to the EU, and optimistic expectations among IoD members for the upcoming year. However, an enduring pain point for firms is the lack of free movement between the UK and EU, which hampers services trade both in terms of being able to travel for work and being able to recruit EU workers into the UK. It will be an important area of discussion in the review of the UK-EU trade agreement, due to take place in 2025/6.

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