Oil price drives up UK trade deficit

By Geoff Percival

Last year’s rise in oil prices and higher level of imports drove up Britain’s goods trade deficit to a higher-than-expected £13.6bn (€15.3bn) in December, new figures show.

Analysts had expected a slightly smaller shortfall of around £11.6bn.

Data from the UK’s Office of National Statistics showed a month-on-month fall of 1.3% in industrial output in December, but a 2.1% rise for the year as a whole.

The biggest monthly fall in five years was driven by a temporary shutdown at the damaged Forties North Sea oil pipeline.

January data is expected to show a rebound due to the pipeline being back online.

The UK’s total trade deficit — covering goods and services — widened by £2.2bn, year-on-year, to stand at £4.9bn in December.

“Despite the fact that for the whole of 2017, production and manufacturing performed well, the UK remains specialised in providing services. At the end of January, the Bank of England published a report arguing that this specialisation disadvantages the UK because there are far more worldwide restrictions for trading in services than goods,” said Josie Dent, economist with the London-based Centre for Economics and Business Research.

Figures for the much bigger services sector are due in a fortnight.

Overall, the data are unlikely to alter the analysis of Bank of England officials who on Thursday upgraded their growth forecasts for Britain on account of an improving global economy, and said interest rates were likely to need to rise sooner than it had thought last year.

Additional reporting Reuters

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