The UK experienced a rise in both imports and exports in the second quarter of 2024, widening the trade in goods deficit to over £50bn, as services helped boost UK economic growth.
According to the latest report from the Office for National Statistics (ONS), the value of goods imports increased by £3.3bn, whereas goods exports rose by £2.3bn. Both EU and non-EU countries saw a boost in both exports and imports.
The ONS attributed the numbers to a rise in imports of machinery, as well as fuel imports from non-EU countries.
Deficit growing
The total goods and services trade deficit widened by £7.1bn to £13.3bn in the second quarter of 2024. The ONS said that this occurred because of the boost to imports.
The trade in goods deficit widened by £7.8bn to £52.4bn, but this number is partially offset by the UK's services exports.
The deficit had been narrowing slightly over the last few quarters, but this latest set of data puts it at the highest level since Q2 2023.
A large trade deficit is not necessarily a bad thing, according to economists, and can be the sign of a healthy economy.
Longer term ‘unchanged’
Chemicals and materials sales to the EU increased in the second quarter, partly because of a rise of organic chemicals purchases from Belgium, offsetting a fall in the export of crude oil to Poland and cars to Belgium.
Sophie Hale, principal economist at the Resolution Foundation, said that the longer-term perspective left the “trend of weak goods trade unchanged.”
“The volume of goods exports was more than 3% lower than in the first half of 2023. On the other hand, services exports and imports were 3.3% and 3.5% higher.”
Previous analysis from UK in a Changing Europe had found that the UK’s goods exports had struggled to recover since 2020, when the UK-EU Trade and Cooperation Agreement (TCA) came into effect, while services exports had experienced high growth.
Services and GDP
The ONS also found that the UK’s GDP grew by 0.6% in the second quarter of 2024. Compared to the same period last year, real GDP is estimated to have grown by 0.9%.
Liz McKeown, director of economic statistics at the ONS, said growth was led by Britain’s dominant services sector, with activity at law firms, IT businesses and scientific research driving the expansion.
She added that the economy had now “grown strongly for two quarters, following the weakness we saw in the second half of last year.”
The figures largely matched economists expectations, according to CityAM.
Ben Jones, lead economist for the Confederation of British Industry (CBI) told the Guardian that the figures showed the UK economy had “finally shaken off its slumber of recent years” but warned that there were still challenges ahead.
Faisal Islam, the BBC’s chief economist, said that, “apart from the pandemic rebound, it’s the strongest half year for growth since 2017”.
However, one potential sign of worry for the British economy is that the growth stalled in the final month of the second quarter, with June experiencing no growth.
Labour and Tory responses
The chancellor, Rachel Reeves, said:
“The new government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth and a £22bn black hole in the public finances.
“That is why we have made economic growth our national mission and we are taking the tough decisions now to fix the foundations, so we can rebuild Britain and make every part of the country better off.”
“Today’s figures are yet further proof that Labour have inherited a growing and resilient economy. The chancellor’s attempt to blame her economic inheritance on her decision to raise taxes – tax rises she had always planned – will not wash with the public,” former chancellor Jeremy Hunt wrote on Twitter.
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