The Office for National Statistics (ONS) published its ‘Pink Book’ at the end of October 2019. It looks at the UK’s balance of payments and allows us to see detailed statistics on UK trade in 2018.
Here we examine the UK’s trade in 2018 compared with recent historical trends, as well as its geographical pattern.
Who does the UK trade with?
Taken as a bloc, the EU is the UK’s largest trading partner. In 2018 the EU accounted for 45% of UK exports and 53% imports.
Looking at individual countries, the USA is the UK’s largest export market, accounting for just under a fifth of UK exports in 2018. Germany was the UK’s largest source of imports, accounting for 12% of UK imports, just ahead of the USA on 11%.
Of the UK’s ten largest trading partners in 2018, seven were EU member states.
A widening of the trade deficit
In 2018, the UK imported more than it exported.
£642 billion worth of goods and services was exported from the UK in 2018, and £680 billion was imported, resulting in a trade deficit of -£38 billion.
This represents a widening of the UK’s trade deficit from -1.2% of GDP in 2017 to -1.8% in 2018 and is the UK’s highest trade deficit to GDP ratio since 2010.
We can analyse this growth in the UK’s trade deficit in two ways – in terms of the geographical pattern of trade and in the difference between trade in goods and services.
Goods vs services
One reason for the UK’s increased trade deficit was a growth in the trade deficit in goods, accompanied by a fall in the value of the UK’s trade surplus in services.
In recent history, the UK has recorded a trade deficit in goods, partly offset by a trade surplus in services. The UK has now recorded a trade deficit in goods every year since 1983, a trade surplus in services every year since 1966 and an overall trade deficit every year since 1998.
In 2018, the UK exported £345 billion of goods and imported £487 billion, resulting in a trade deficit of -£142 billion. This was equal to -6.7% of GDP, up slightly from -6.6% in 2017. The UK has now recorded a trade deficit in goods every year since 1982.
The value of the UK’s trade surplus in services fell from £111 billion in 2017 to £105 billion in 2018, equivalent to a fall from 5.4% to 4.9% of GDP.
The UK’s increased trade deficit in goods was driven by an increase in the value of imported goods, from £473 billion in 2017 to £487 billion in 2018. This was partly driven by increases in the value of fuel imports – the value of both oil and gas imports increased by around 20% between 2017 and 2018.
The narrowing of the trade surplus in services was driven by a growth in service imports.
While the value of UK service exports remained fairly consistent between 2017 and 2018, imports of services grew by 6%, from £181 billion to £193 billion.
This was driven by a growth in imports of financial services, which grew by 15% (from £14 billion to £17 billion), as well as imports of transportation services which grew by 13% (from £22 billion to £26 billion) and other business services, which grew by 5% (from £60 billion to £63 billion).
Geographical pattern of the UK’s trade deficit
Another way of looking at the UK’s increased trade deficit is in terms of changes in the geographical pattern of UK trade.
In recent history, the UK has recorded a trade deficit with EU countries, partly offset by a trade surplus with countries outside the EU.
In 2018, the UK recorded a trade deficit with EU countries of -£66 billion, up slightly from -£65 billion in 2017. However, 2018’s deficit with the EU was equal to -3.1% of GDP, down slightly from 2017 and the lowest deficit to GDP ratio with the EU since 2014.
The UK’s trade surplus with non-EU countries has generally declined in the last few years, from a high of £43 billion in 2015 to £29 billion in 2018. 2018’s surplus was equal to 1.3% of GDP, its lowest level since 2012.
One reason for this was a marked increase in the UK’s trade deficit with European countries outside the EU. While the UK’s trade deficit with the EU remained consistent, the deficit with non-EU European countries jumped from -£8 billion to -£13 billion. This was in part due to widening of the trade deficit with Russia, which reached -£4 billion, reflecting an increase in the value of fuel imports.
The UK’s deficit with Asian countries remained consistent, as did the UK’s surplus with the Americas, whereas UK trade with African countries went from a £4 billion surplus in 2017 to a deficit of -£0.3 billion.
Overall, the UK recorded a trade deficit with Europe (both EU non-EU countries combined), Asia and Africa; surpluses were recorded with the Americas and Australasia and Oceania.
Statistics on UK trade with the EU, The House of Commons Library