Brexit latest: UK exports disappoint in July despite sterling slump

The volume of goods sent overseas was up 1.2 per cent on the previous quarter, the weakest increase since October

The goods trade deficit was £11.6bn in the month, slightly worse than June's downwardly revised estimate of £11.5bn (EPA)

The UK’s goods exports disappointed in the three months to July despite the post-Brexit vote slump in sterling, official figures released on Friday showed.

The volume of goods sent overseas was up 1.2 per cent on the previous quarter, the weakest increase since last October, the Office for National Statistics reported.

Goods imports rose 1.4 per cent over the three-month period.

The goods trade deficit was £11.6bn in July, slightly worse than June’s downwardly revised estimate of £11.5bn.

The total trade deficit – factoring in the UK’s services surplus – was static at £2.9bn in July.

The ONS also separately reported that the output of the UK’s construction industry slumped by 0.9 per cent in July while industrial production managed only a modest expansion of 0.2 per cent.

Oil and gas extraction fell back sharply after June’s spike.

However, manufacturing output grew by 0.5 per cent in July, the strongest growth registered this year.

The British Chambers of Commerce today warned that the 14 per cent slump in trade-weighted sterling since the June 2016 Brexit vote was doing “more harm than good” to the UK economy.

Disappointing performance

“Today’s flurry of activity data suggests that the industrial and construction sectors are still providing little offset to the consumer slowdown,” said Ruth Gregory of Capital Economics.

She also described the trade figures as “fairly disappointing”.

“We expect exporters to respond to sterling’s further 2 per cent depreciation in August by raising their sterling prices further, ensuring that profits – not volumes – benefit,” said Samuel Tombs of Pantheon.

“Juicy profit margins eventually will attract domestic firms to export and undercut incumbents, but this rebalancing will be tentative, given the huge uncertainty regarding Britain’s future trade ties”.

Commenting on the overall package of data, Howard Archer of the EY ITEM Club said: “GDP growth is likely to be limited to 0.3 per cent quarter-on-quarter again in the third quarter”.

The eurozone economy grew at double the rate of the UK’s in the second quarter, recording a 0.6 per cent expansion.

However, the latest forecast of UK GDP growth from the National Institute of Economic and Social Research released Friday pointed to an expansion of 0.4 per cent in the three months to August and the think tank is projecting an increase in exports in the second half of 2017, helped by sterling’s decline.

“If indeed economic growth is sustained at the 0.4-0.5 per cent level, we prescribe a 25 basis point increase in Bank Rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August in response to the EU referendum result,” said Amit Kara, Niesr’s head of macroeconomic forecasting.