UK trade gap widens despite weaker pound

London: The UK trade deficit unexpectedly widened in June, a sign that the decline in the value of the pound has yet to benefit exporters as the global recession persists.

The goods-trade gap was £6.5 billion (Dh39.4 billion), compared with £6.2 billion in May, the Office for National Statistics said yesterday in London.

The median forecast of 15 economists surveyed by Bloomberg News was for a £6.2 billion deficit. Exports rose 1.4 per cent, outpaced by a 2.2 per cent increase in imports.

"We remain sceptical that the United Kingdom is about to become an export-driven economy any time soon," said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd and a former central bank official.

"A return to sustained growth continues to look unlikely in the near term."

The Bank of England said last week that there is now evidence of stabilisation in Britain's main export markets, while the world economy remains in recession. Policymakers have extended their programme of bond-buying by £50 billion to help the economy shake off the slump.

"Volumes of exports are not particularly great and that tells you what's going on abroad," George Buckley, chief UK economist at Deutsche Bank AG in London, said before the report's release.

"Sterling has fallen but these things take a long time to take effect."

Exports to nations outside the European Union fell 2.6 per cent, the statistics office said. Sales to EU countries, accounting for more than half of all exports, increased by 4.8 per cent, the data showed.

Wolfson Microelectronics Plc, a Scottish maker of semiconductors, on July 28 posted its third consecutive quarterly loss as demand fell for satellite navigation devices and MP3 players.

Reports this month have added to evidence the economy is improving. UK service industries expanded the most since 2008 in July, Markit said last week.

Consumer confidence rose to the highest level in more than a year, and manufacturing increased the most since January 2008 in June.

The trade gap in the second quarter narrowed to £19.6 billion, the smallest in three years, the statistics office said.

The weakness of the pound may encourage export sales. The pound has dropped 10 per cent against a basket of currencies from Britain's biggest trading partners in the past year.

Glasgow, Scotland-based Weir Group Plc, the world's biggest maker of pumps for the mining industry, said last week that its full-year earnings will be at the top end of its own estimates as currency movements boost sales.

"The world economy remains in recession, though there have been increasing signs that output in the United Kingdom's main export markets is stabilising," the Bank of England said in a statement last week.