U.K. Trade Gap Narrows to Smallest in Three Years

The U.K. trade deficit narrowed in May to the smallest in three years as imports dropped, a sign the recession and the weakness of the pound is hurting demand for foreign products.

The goods-trade gap was 6.3 billion pounds ($10 billion), the least since June 2006, compared with 7.1 billion pounds in April, the Office for National Statistics said today in London. Imports fell 4 percent and exports declined 0.8 percent.

The pound’s 18 percent slide against the dollar in the past year is making British exports more competitive and encouraging companies to shun imports. Manufacturers have nevertheless struggled to raise overseas sales as global trade slumps, hindering a recovery from the U.K. economy’s worst contraction in five decades.

The deficit with countries outside the European Union narrowed to 3.3 billion pounds from 4.1 billion pounds as exports plunged 8.7 percent, today’s report showed.

The decline in the pound is driving up costs for companies that rely on imports. Hornby Plc, the 102-year-old U.K. company that makes model trains, said on June 5 full-year profit dropped 31 percent because of the weak pound and supply problems.

U.K. Trade Gap Narrows to Smallest in Three Years

TradingEconomics.com, Bloomberg
7/9/2009 9:46:55 AM