The UK’s trade performance fell to its worst level since records began in the first quarter of 2022, heaping more pressure on sterling in international currency markets.
Although the Office for National Statistics warned that the figures it published were “subject to higher levels of uncertainty than normal”, the new system it used to collect the trade data based on customs records was chosen because it was thought to be more accurate.
The weak performance of UK exports and a surge in imports will add to pressure on the government over the damaging economic effects of Brexit as the official figures corroborate academic studies showing a rupture in UK exports since the new border controls were imposed in 2021.
The data showed that the UK’s current account deficit was 8.3 per cent of gross domestic product in the first quarter of 2022, a deterioration from an average of 2.6 per cent across all the quarters of 2021.
That was the worst figure on record since quarterly balance of payments data was first published in 1955.
Part of the decline arose from movements of gold and other precious metals, which have little to do with normal trading relationships. Excluding these volatile elements, the current account deficit rose from an average of 2.4 per cent of GDP in 2021 to 7.1 per cent in the first quarter of this year.
Most of the current account deficit stems from a record imbalance of imports and exports, but there were also deficits in investment income and transfers of money between countries.
The ONS said it was investigating the big rise in imports it had recorded along with foreign direct investment and advised caution on interpreting the very poor data.
Paul Dales, chief economist at Capital Economics, said the most noteworthy elements in the figures was a 4.4 per cent fall in real exports and a huge 10.4 per cent leap in real imports.
“At the start of this year, the ONS started to measure imports between the UK and the EU in a slightly different way” which resulted in a “large step change upwards” said Dales, adding the figures were “really hard to interpret”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, identified “a surge in energy prices” as the primary cause of the UK’s difficulties.
He echoed the former Bank of England governor, Mark Carney, who warned repeatedly after the Brexit referendum that the value of the pound depended on the “kindness of strangers”.
Tombs said: “The adverse consequences of the UK dependence on external finance that stems from the large current account deficit have been clear over the last month, with sterling depreciating sharply as global investors have collectively shunned risky assets”.
The pound, which was stable in currency markets on Thursday morning, has lost more than 10 per cent of its value against the US dollar over the past year, while remaining broadly stable against the euro.