U.K. Trade Gap Widened as Car Exports Dropped to U.S., China

The U.K. trade deficit widened to the most in three months in February as exports of cars and heavy machinery fell, especially to the U.S., China and Russia.

The goods-trade gap widened to 8.77 billion pounds ($14 billion) from a revised 7.88 billion pounds in January, the Office for National Statistics said today in London. The median of 18 forecasts in a Bloomberg News survey was for a deficit of 7.65 billion pounds. Exports fell 3.4 percent while imports were unchanged.

Prime Minister David Cameron is in Asia this week, leading a trade and diplomatic mission seeking to boost commercial ties with the region. The government hopes exports can bolster the British economy as manufacturers cope with rising unemployment and inflation that’s reducing demand at home.

“Concern persists that U.K. exports will be limited in the near term at least by muted global growth,” Howard Archer, an economist at IHS Global Insight in London, said before the report. “Meanwhile, moderate domestic demand is likely to limit U.K. imports over the coming months.”

Britain’s trade deficit with countries outside the European Union widened to 5.02 billion pounds in February from 3.72 billion pounds in January. Exports to those countries fell by 8.8 percent to 11.7 billion pounds.

The gap with EU nations narrowed to 3.76 billion pounds from 4.17 billion pounds.

PV Crystalox Solar Plc, a maker of solar-power components based in Abingdon, England, reported a full-year net loss on March 28 and canceled its dividend due to “very challenging” market conditions.

While Bank of England Governor Mervyn King still says the U.K.’s predicament feels “like a crisis,” policy makers kept the central bank’s asset-purchase plan unchanged last week as they awaited new forecasts for growth and inflation due next month. The British Chambers of Commerce said April 3 that the U.K. will probably avoid a recession, though the recovery remains “weak.”

Nevertheless, U.K. manufacturing growth unexpectedly accelerated in March to the fastest in 10 months, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report last week.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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