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UK trade deficit takes biggest share of GDP in over 20 years – ONS UK deficit jumps to 24 year high – ONS
(about 2 hours later)
There were warnings Britain's economic recovery was on shaky ground on Friday after official data showed the country's current account deficit with the rest of the world soared to its highest since 1989.There were warnings Britain's economic recovery was on shaky ground on Friday after official data showed the country's current account deficit with the rest of the world soared to its highest since 1989.
Dealing a blow to chancellor George Osborne's push for a Britain that can "pay its way" in the world, the gap – Britain's trade deficit, plus the losses UK plc makes on its overseas ventures – ballooned to £21bn in the three months to September from a deficit of £6bn in the previous quarter.Dealing a blow to chancellor George Osborne's push for a Britain that can "pay its way" in the world, the gap – Britain's trade deficit, plus the losses UK plc makes on its overseas ventures – ballooned to £21bn in the three months to September from a deficit of £6bn in the previous quarter.
As a percentage of GDP, the deficit was 5.1%, the biggest share for more than 20 years, the Office for National Statistics said.As a percentage of GDP, the deficit was 5.1%, the biggest share for more than 20 years, the Office for National Statistics said.
There was similarly downbeat news for the government's push to rebalance the economy from figures on what has been driving growth, and separate ONS data showed that public finances deteriorated last month.There was similarly downbeat news for the government's push to rebalance the economy from figures on what has been driving growth, and separate ONS data showed that public finances deteriorated last month.
Graeme Leach, chief economist at the Institute of Directors, said: "As the chancellor looks at the latest GDP figures, he's likely to reach for a glass of wine and indigestion tablets at the same time. The strength of GDP, with faster year-on-year growth, will be a cause for celebration. But the sources of that growth will make him uncomfortable."Graeme Leach, chief economist at the Institute of Directors, said: "As the chancellor looks at the latest GDP figures, he's likely to reach for a glass of wine and indigestion tablets at the same time. The strength of GDP, with faster year-on-year growth, will be a cause for celebration. But the sources of that growth will make him uncomfortable."
While GDP was confirmed to have picked up 0.8% in the third quarter, the detailed breakdown suggested consumers have been driving down their savings. But the economy had performed a little better than previously thought in preceding quarters, and growth on a year earlier was revised up to 1.9% from 1.5%, the ONS said.While GDP was confirmed to have picked up 0.8% in the third quarter, the detailed breakdown suggested consumers have been driving down their savings. But the economy had performed a little better than previously thought in preceding quarters, and growth on a year earlier was revised up to 1.9% from 1.5%, the ONS said.
Economists, however, largely focused on signs that squeezed households continued to be relied upon to drive growth despite a push for exports and manufacturing to take the lead. That echoed a warning earlier on Friday from ratings agency Standard & Poor's (S&P) about the sustainability of the recovery.Economists, however, largely focused on signs that squeezed households continued to be relied upon to drive growth despite a push for exports and manufacturing to take the lead. That echoed a warning earlier on Friday from ratings agency Standard & Poor's (S&P) about the sustainability of the recovery.
"The national accounts for the third quarter provide a few reasons to doubt that the UK's economic recovery will be able to maintain its current strong pace for much longer," said Samuel Tombs, UK economist at Capital Economics."The national accounts for the third quarter provide a few reasons to doubt that the UK's economic recovery will be able to maintain its current strong pace for much longer," said Samuel Tombs, UK economist at Capital Economics.
He pointed to figures showing real incomes grew 0.4% on the quarter but spending was up 0.8%, suggesting people were eating into their savings to spend.He pointed to figures showing real incomes grew 0.4% on the quarter but spending was up 0.8%, suggesting people were eating into their savings to spend.
"Lower saving can only support growth in spending for so long. Meanwhile, the current account deficit widened … So for now, the economy's growth spurt seems to be exacerbating existing imbalances in the economy, rather than helping them to heal," Tombs added."Lower saving can only support growth in spending for so long. Meanwhile, the current account deficit widened … So for now, the economy's growth spurt seems to be exacerbating existing imbalances in the economy, rather than helping them to heal," Tombs added.
The Treasury welcomed the upgrades to previous growth numbers from the ONS but conceded there was much more work to be done.The Treasury welcomed the upgrades to previous growth numbers from the ONS but conceded there was much more work to be done.
"Today's data shows that the recovery has been stronger than previously thought and that the government's long-term economic plan is working. But risks remain and the job is not done, so the government will go on taking the difficult decisions needed to deliver a responsible recovery for all," said a spokesman."Today's data shows that the recovery has been stronger than previously thought and that the government's long-term economic plan is working. But risks remain and the job is not done, so the government will go on taking the difficult decisions needed to deliver a responsible recovery for all," said a spokesman.
There was some good news for Osborne on Friday when S&P affirmed the UK's AAA rating. But it said the outlook remained negative.There was some good news for Osborne on Friday when S&P affirmed the UK's AAA rating. But it said the outlook remained negative.
The British Chambers of Commerce (BCC), which has been campaigning for more government help for companies that want to export, described Friday's data as a "mixed bag". With the economy now 2% smaller than before the crisis, according to the ONS, the BCC welcomed progress on closing the gap on pre-recession times.The British Chambers of Commerce (BCC), which has been campaigning for more government help for companies that want to export, described Friday's data as a "mixed bag". With the economy now 2% smaller than before the crisis, according to the ONS, the BCC welcomed progress on closing the gap on pre-recession times.
"The upward revisions to earlier quarters support our view that the UK's economic performance has been stronger than initially thought," said the BCC's chief economist, David Kern."The upward revisions to earlier quarters support our view that the UK's economic performance has been stronger than initially thought," said the BCC's chief economist, David Kern.
"But concerns still remain … While it is good news that we are recovering, and that earlier quarters were better than previously thought, the large current account deficit highlights the importance of prioritising measures to boost exports.""But concerns still remain … While it is good news that we are recovering, and that earlier quarters were better than previously thought, the large current account deficit highlights the importance of prioritising measures to boost exports."
The ONS data on the latest state of the public coffers showed net borrowing, excluding various temporary effects, was £16.5bn in November, up almost a £1bn on a year earlier. Last month's performance took underlying borrowing in the fiscal year to date to £84bn, which is 2.2% lower on the same period a year earlier.The ONS data on the latest state of the public coffers showed net borrowing, excluding various temporary effects, was £16.5bn in November, up almost a £1bn on a year earlier. Last month's performance took underlying borrowing in the fiscal year to date to £84bn, which is 2.2% lower on the same period a year earlier.
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