UK exports took their biggest plunge in more than three years during January, official figures showed today.
Exports fell by £1.4bn (€1.54bn), or 6.9%, to £19.5bn (€21.5bn) compared with December in the largest month-on-month fall since July 2006, according to the Office for National Statistics (ONS).
While the ONS has no hard data yet on the impact of the winter weather on exports, it is likely that snow-bound manufacturers struggled to get their goods to ports.
JP Morgan economist Malcolm Barr said: “It is plausible that the snow disruption was more of a constraint on the ability to get UK exports to airports and the dockside than it was on receiving imports.”
Exports to the US were the biggest casualty over the month, with a £500m (€550.7bn) slide.
The overall decline far outstripped a 1.6% decline in imports – leaving the UK’s goods trade gap with the rest of the world widening from £7bn (€7.7bn) to £8bn (€8.8bn) in January.
This is the biggest trade gap since August 2008 and undermines hopes that a weaker pound will boost exports and help rebalance the economy.
The pound came under further pressure today, falling below $1.50 as ratings agency Fitch also reiterated its concerns over the UK’s public finances and called for tougher action on the deficit at a London conference.
Experts warned the poor trade figures would continue to act as a drag on recovery during the first quarter of 2010, having knocked off 0.2% from the UK’s 0.3% growth in the final three months of 2009.
Vicky Redwood of Capital Economics said: “There is clearly a big question mark over whether any improvement in net trade will come through quickly or strongly enough to offset the weakness in domestic demand.”
The British Chambers of Commerce also warned that the Government needed to do more to support trade after a survey of 250 exporting businesses which found that one in eight had experienced problems securing access to trade finance over the past year.
David Frost, director-general of the British Chambers of Commerce (BCC), said: “If the Government is serious about encouraging British exports as a driver of employment, economic growth and prosperity, it must resolve blockages in the finance that underpins UK global trade.
“Our exporters need to be able to compete more effectively with rivals on the continent and further afield, who are currently better supported during difficult economic environments or in riskier foreign markets.”