Delight at dropping deficit

While times remain hard, one glimmer of hope is helping to dispel gloom on the international trade front, according to the British Chambers of Commerce’s top economic expert.

This is a near two-thirds reduction in the UK’s trade deficit, which fell to £1.5 billion in July compared to £4.2 billion in June.

According to David Kern, the BCC’s chief economist this sizeable decline more than reverses the setbacks seen in June. And more importantly, perhaps, he points to the fact that Britain’s export volumes rose over the past three months while imports fell.

“We know that British exporters are facing major challenges due to problems in the Eurozone and the global economy as a whole, so progress towards rebalancing will be slow and painful,” he says.

“However, the latest trade figures show encouraging progress, and reinforce our hope that the UK economy will return to positive growth in the third quarter of 2012. UK exports to non-EU countries were slightly higher than exports to the EU in the last three months, which shows a shift in the traditional pattern where exports to the EU are usually much stronger.

“These developments show that British exporters are making the right decisions and moving to faster-growing areas outside the EU. We have always stressed that exporting companies have huge untapped potential to expand, but need the right support to help them compete and break into new markets.”

Mr Kern strongly believes that firmer government action in key areas such as trade finance, promotion and insurance would make a good starting point, but this should be part of a policy shift to actively boost growth.