UK trade deficit is as large as ever

I think I am on safe ground when I say that a pattern is emerging here. The UK trade balance is not improving, despite a significant exchange rate depreciation. Instead, both exports and imports are falling.

The story behind these numbers is straightforward. On the import side, demand is falling as household incomes contract, firms reduce demand and unemployment rises. Imports are also falling due to the declining value of sterling. Cheap foreign tat isn't quite as cheap as it used to be.

On the export side, we should have seen some improvement in performance. The collapse of sterling should have made UK goods cheaper and therefore more cost-competitive in foreign markets. Instead, we see export demand contract. The only explanation must be that foreign markets are also contracting. The statistical services in North America and Europe are more than happy to confirm that hypothesis.

Today's trade numbers put to bed that old canard that the UK can export its way out of trouble on the back of a weak pound.