UK industrial output declines while trade deficit widens

Industrial production in the UK fell by 0.4% between July and August, the Office for National Statistics (ONS) said on Friday.

Its latest report – the second based on data after EU referendum – shows that a month-on-month fall in mining and quarrying was partially offset by a rise in manufacturing.

“Manufacturing output was up slightly in August with more cars built, with limited evidence suggesting the lower pound boosted exports,” commented ONS senior statistician Kate Davies.

“Nevertheless, this was offset by a fall in oil and gas production, with some field shutdowns contributing to the fall, meaning UK production as a whole was down. While exports continued to grow in August, the UK’s trade deficit widened, as imports grew at a faster rate.”

The month-on-month decline in industrial output for August followed a 0.1% increase in July, but the ONS cautioned against “overly interpreting one month’s figures”.

Compared with August 2015, industrial output increased by 0.7%.

Separate figures from the ONS on Friday showed that the UK’s trade deficit widened in August.

The deficit on trade in goods and services was estimated at £4.7bn, an increase of £2.5bn from £2.2bn in July. Exports increased by £0.1bn while imports increased by £2.6bn.

The deficit on trade in goods alone widened by £2.6bn to £12.1bn.

BBC News noted that the widening deficit comes despite hopes that the weaker pound will boost demand for British goods. Sterling fell to a 31-year low against the dollar on Friday amid on fears of the consequences of the UK making a “hard” exit from the European Union.

Commenting on the August trade figures, Mike Spicer, director of research and economics at the British Chambers of Commerce (BCC), said:

“The post-referendum fall in sterling has been widely reported as a boon to exporters, but this has also increased the cost of imported goods and materials, and Britain’s export sector is heavily integrated with global supply chains.

“The Chancellor’s Autumn Statement needs to include measures that support businesses looking to access new export markets, including expanding support for trade fairs and missions, to at least match that provided by our competitors. Businesses also need improved infrastructure at home to create a more competitive business environment and help get our goods and services to market.”