The publication of the Office for National Statistics’ (ONS) Pink Book last week, detailing the UK’s balance of payments, shows us which countries the UK traded with in 2016. Here we examine the UK’s trade in 2016 in light of recent historic trends, as well as the geographical pattern of UK trade.
An ongoing pattern of trade deficits…
In 2016, the UK exported £548 billion of goods and services and imported £591 billion, resulting in a trade deficit of £43 billion. This equates to 2.2% of GDP, up from 1.7% in 2015. In 2016, the UK recorded its highest trade deficit to GDP ratio since 2010, when it reached 2.6%.
The UK has recorded a trade deficit in its combined trade in goods and services every year since 1998. Since 1948, the UK has recorded a trade surplus – meaning the value of exports exceeded the value of imports – 18 times. The longest sustained period of trade surpluses was the 9 years between 1977 and 1985; the remaining 9 were recorded between 1956-58, 1969-71 and 1995-97.
Goods vs Services
While the UK recorded an overall trade deficit in 2016, a surplus was recorded in trade in services. UK exports of services were £245 billion in 2016, while imports of services were £153 billion, resulting in a surplus of £92 billion. This equates to 4.7% of GDP, up slightly from 4.6% in 2015, though down from a record high of 4.8% in 2013.
However, this surplus was more than offset by a deficit in the UK’s trade in goods – exports of goods were £302 billion, while imports were £438 billion in 2016, resulting in a deficit on trade in goods of £135 billion. This equates to 6.9% of GDP, up from 6.3% in 2015.
2016 figures represent both the UK’s highest ever deficit in trade in goods and highest ever surplus in trade in services, though these figures are not adjusted for inflation.
The UK has now recorded a trade deficit in goods every year since 1981. The UK has recorded 6 surpluses in trade in goods since 1948 – these were in 1956, 1958, 1971 and 1980-82. By contrast, the UK has recorded a trade surplus in services every year since 1966 and in all but five years since 1948.
Geographical pattern of UK trade
Trade with the EU
Taken as a bloc, the EU was UK’s largest trading partner in 2016 – it accounted for 43% of UK exports of goods and services and 54% of UK imports. Overall, the UK recorded a trade deficit with the EU in 2016: a surplus of £14 billion in services was offset by a deficit in goods of £96 billion, resulting in an overall trade deficit of £82 billion.
The UK had a trade deficit with 18 of the 27 other EU member states in 2016, a surplus with 4 others and was broadly in balance with the remaining 5. The UK’s largest EU trade surplus was with Ireland (£6 billion) while its largest deficit was with Germany (£26 billion).
The UK had a trade surplus with non-EU countries in 2016 of £39 billion – a deficit in goods of £39 billion was offset by a surplus in services of £78 billion. The UK has now recorded a trade surplus with non-EU countries every year since 2012.
Trade by region
Overall, Europe (including both EU and non-EU countries) accounted for 55% of UK exports, compared with 22% for the Americas, 18% for Asia, 3% for Africa and 2% for Australasia.
Trade with individual countries
Looking at individual countries, the USA was the UK’s largest trading partner in 2016. The UK exported £100 billion of goods and services to the US, 18% of all UK exports. This was more than twice as much as exports to Germany, the UK’s second largest export market.
7 of the UK’s top 10 export markets in 2016 were EU member states – the remaining 3 were the US, China and Switzerland.
Germany was the UK’s largest source of imports in 2016, with imports totalling £75 billion, 13% of all UK imports. The US was the second largest source of imports at £66 billion (11% of all imports) and the Netherlands third at £42 billion (7% of all imports).
7 of the UK’s top 10 import markets were in the EU in 2016 – the remaining 3 were the US, China and Norway.
These figures do not account for what is known as the Rotterdam effect – the theory that the UK’s trade with the Netherlands is artificially inflated owing to goods being dispatched to or arriving from the port of Rotterdam, even if the original source or eventual destination country is elsewhere. This will also have a potential knock-on effect, as some trade recorded with the Netherlands may ultimately be with non-EU countries
The scale of this effect is not known, though even if a high proportion of recorded UK trade with the Netherlands is with non-EU countries, the EU remains the UK’s largest trading partner by a considerable margin.
There is some further discussion on the Rotterdam effect in this 2015 article published by the ONS.
Definitions of goods and services:
- In general, goods are tangible items and can be divided into primary goods – raw or partly refined materials found in nature, such as oil or coal; semi-manufactured goods – goods used as in the production of finished goods, such components of a car engine and finished manufactured goods, such as cars or aircraft. Overall, finished manufactured goods made up 54% of UK goods exports and 2016.
- Data on trade in services will include services supplied by a company or individual from one country to a company or individual from another country, such as a British architectural firm designing a building for a foreign client. Service trade data will also include services consumed by a resident of one country in another, for example an American tourist staying in a hotel in the UK will count as a service export, while a British tourist staying in an American hotel would count as a service import. Overall, financial services and other business services made up 52% of all UK service exports in 2016.