Newly released government data for June 2022 shows a record increase in the trade deficit, fuelled by ongoing inflationary pressures, supply chain issues and the war in Ukraine.

Fresh data from the Office of National Statistics (ONS) showed a fall in June of the imports and exports of goods and a jump in the quarterly trade deficit of £2.0 billion, to £27.9 billion.

This increase in the deficit is the largest since records began in 1997, and was fuelled by soaring energy costs after the Russian invasion of Ukraine, and as well as wider effects of inflation, according to the Evening Standard.

The value of total exports of goods – to both EU and non-EU countries – decreased by £2.7 billion (8.0%) in June 2022. This figure excludes precious metals.

Quarterly result

However, with April and May both producing 7.4% month-on-month rises in UK goods exports, the overall picture for Q2 of 2022 is a more positive one.  

In Q2 overall, goods exports rose by 12.4% compared with Q1, while goods imports to the UK increased by 8.3%.

Compared with the previous three months, the value of UK goods exported to the EU rose across the quarter by 16.3% – an increase attributed to fuel re-exports and ships, aircraft and mechanical machinery. Exports to the rest of the world rose by 8.6%.

Pressure building

IOE&IT director general Marco Forgione sounded a warning note as a caveat to the ONS data, referencing the Institute’s own research for the month of July.

“Although superficially the ONS figures look positive, the IOE&IT Monthly Exporter Monitor shows that fewer companies are exporting and fewer goods are being exported. This indicates there is significant inflationary pressure building in the economy,” he said, in comments made to The Guardian.

“Also worrying is the dramatic increase in the cost of imports, these price pressures will undoubtably feed through to what consumers pay, further adding to the cost of living crisis,” he added.

Exporter revenue fall

Data from the July edition of the IOE&IT’s UK Exporter Monitor, released yesterday (11 August), found that revenues of exporters had fallen by 2%.

Forgione said that the IOE&IT’s business and individual members “are telling us they have grave concerns regarding even bigger price increases later this year, both because of the energy crisis in Europe and the problems faced by our second biggest trading partner, Germany”.

The FT reports that Germany, an economy heavily dependant on exports, was facing economic jitters with finance minister Christian Lindner warning that the financial situation of the country was “fragile.”

The Exporter Monitor uses HMRC data, as well as information directly from bills of lading and other publicly available data sets, and compares them to information from Bureau van Dijk FAME to establish turnover and employment levels, whilst the ONS relies on 30 government data sources for their trade statistics.