Balances… The balance of trade, AKA net exports, AKA the difference between what our country exports and what it imports. This is what the above graph shows for each year since 1980. You’ll notice that there hasn’t been a positive number since 1997. In fact, the past 15 years have delivered the 15 largest deficits in history. Last year’s total comes fifth in that list, with a £35 billion distance between what was exported and what was imported.
…and imbalances. There are imbalances within this imbalance. Perhaps the most significant is that between goods and services. When it comes to the latter, we’re actually exporting more than we’re importing – to the sum of £86 billion. Whereas, for the former, it’s the other way around – to a deficit of £121 billion. Hence why goods account for a full 76 per cent of our £542 billion worth of imports, but only 57 per cent of our £507 billion worth of exports. We want what we don’t have.
At your service. This returns us to the point I made in April about the dominance of Britain’s services sector. George Osborne can talk about a “march of the makers”, and urge them to double exports to £1 trillion by the end of this Parliament, but economies tend to move at a slower pace. We have been a net importer for 17 years now, and a net importer of goods for even longer than that – going back to 1983. This will not be changed in a few years.
The outside world. And it’s not just the nature of our economy, but things outside of it too. Pound Sterling has strengthened relative to many other currencies, which makes exports more expensive and imports cheaper. China, which I wrote about last week, will become the great example of this. Even in June – just before the Chinese Government started properly devaluing the Yuan – Britain’s exports to its third biggest trading partner had fallen by 0.2 per cent, whilst imports had risen by 3.8 per cent. Those trends are likely to hasten.
Another missed target. Then what? Few observers are optimistic about the progress of British exports. As Mark Carney put it in February, “Weak world demand and the appreciation of sterling will hold back the expansion of net exports.” The Office for Budget Responsibility actually predicts that net trade will make a “small negative contribution” to growth in each of the next five years. Yes, Osborne’s £1 trillion target is a long way off.