The UK’s trading performance fell this year to its worst level since records began, putting more pressure on sterling in international currency markets.
The country’s current account deficit was calculated to be 8.3 percent of gross domestic product in the first quarter of 2022, down from an average of 2.6 percent for all of 2021.
It was the worst figure ever since the publication of the balance of payments data in 1955.
The weak performance of UK exports and a strong increase in imports highlight the economic effects of Brexit. The figures are in line with academic studies showing a decline in exports since 2021, when the UK left the EU’s single market and new border controls were introduced.
The Office for National Statistics warned that the figures for the first quarter of 2022 were “subject to higher levels of uncertainty than usual”. It added that it had developed a new system based on customs data to increase accuracy.
Even excluding relatively volatile commodities such as gold and other precious metals, the current account deficit still widened from an average of 2.4 percent of GDP in 2021 to 7.1 percent in the first quarter of this year.
The gaping current account deficit largely reflects a record imbalance of imports and exports. However, there were also shortfalls in investment income and money transfers between countries.
The ONS said it examined a large surge in imports it recorded along with foreign direct investment and advised caution in interpreting the quality of the data.
Paul Dales, chief economist at Capital Economics, said the most notable element in the figures was a 4.4 percent drop in real exports and a 10.4 percent increase in real imports.
“Early this year, the ONS started measuring imports between the UK and the EU in a slightly different way.” This resulted in a “big incremental upward shift,” he said, adding that the numbers were “very difficult to interpret.”
Samuel Tombs, the UK’s chief economist at Pantheon Macroeconomics, said a surge in energy prices was the main cause of the country’s problems.
He echoed former Bank of England governor Mark Carney, who repeatedly warned after the Brexit referendum that the value of the pound depended on the “kindness of strangers”.
“The ill effects of the UK’s reliance on external financing stemming from the large current account deficit have become apparent in the past month, with the pound depreciating sharply as global investors have collectively shunned risky assets,” he said. tombs.
The pound, which was stable in foreign exchange markets Thursday morning, has lost more than 10 percent of its value against the US dollar over the past year, while it has remained largely stable against the euro.