UK trade deficit falls

10-07-2007

UK trade deficit falls
Britain's trade deficit with the rest of the world narrowed to £3.5 billion in May, official figures have shown.

May's data from the Office for National Statistics (ONS) compares with a shortfall of £4.2 billion in April.

But the figures are highly likely to be changed in the coming months after the ONS upwardly revised April's data from £3.6 billion.

The revision stems from the impact of carousel fraud across the EU, which means today's figures are unlikely to resonate with the Bank of England's interest rate-setting monetary policy committee (MPC).

Carousel fraud, sometimes referred to as missing trader intra-community (MTIC) fraud, involves criminals gaining VAT registration to acquire easily transportable-goods such as computer chips and mobile phones.

The rogue traders then sell them on at prices including VAT in other European countries, but they disappear before passing on the consumer-paid VAT to the relevant tax authorities.

According to HM Revenue and Customs carousel fraud costs the UK as much as £2 billion every year.

Today's ONS data also reveals that Britain's surplus on trade in services was unchanged at £2.8 billion in May, while its deficit on trade in goods shortened by £0.6 billion to £6.3 billion.

In trade with the enlarged EU exports and imports rose by £0.4 billion and £0.2 respectively, while exports to non-EU countries increased by £0.2 billion and imports fell by the same value.

"There was a fall in exports of oil but it was more than offset by small rises in other areas," the ONS said.

"There was a rise in imports of precious stones, which was more than offset by falls in imports of fuels other than oil, and capital goods.

"Excluding oil and erratic items, the volume of exports was 3.5 per cent higher in May than in April and the volume of imports was 0.5 per cent lower."


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