UK Current Account Deficit Widens

Friday, 21st December 2018

The deficit is currently sitting at 4.9%, the largest deficit recorded since Q3 2016 in both percentage terms and value. According to the Office for National Statistics, the gap is due to a poor trade balance as the service sector, which previously had a surplus, has seen a fall in value. In addition, the primary income balance deficit has increased as foreign investors are now seeing larger profits on their assets in the UK.

Britain was one of the best performing major economies over the last quarter, ahead of France, Germany, Italy and Japan, but emerging economies performed significantly better.

There has been a fall in business spending, as companies are reluctant to invest in significant assets such as warehouses, machinery or offices until they have some idea what is going to happen after Brexit. Over the last year, business investment has dropped by 1.8%. There has been contraction in spending for three consecutive quarters. This is the first time in a decade that the UKs economy has seen such sustained contraction. Industrial production, however, is on the increase and construction has also grown by 2.3 percent, so there are some glimmers of hope in the UK economy.

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