A jump in exports helped Britain’s trade gap narrow to its smallest for a year in April, raising hopes that overall economic growth has rebounded from its slump at the start of 2015.

The Office for National Statistics (ONS) said goods exports rose and imports fell in April, helping the trade deficit to shrink by more than City economists had forecast and by the biggest amount since June 2013. At £8.6bn after £10.7bn the month before, it was the lowest deficit since March 2014.

Economists said the narrowing boded well for overall growth after net trade was a drag on the economy in a slow opening quarter to 2015. The consensus forecast in a Reuters poll had been for the April deficit to narrow only moderately to £9.9bn.



“Although the near-term outlook for the external sector does not look fantastic, at least net trade this quarter looks unlikely to repeat the first quarter’s big negative contribution to overall GDP growth,” said Vicky Redwood, chief UK economist at Capital Economics.

Smallest gap for a year

The ONS said the UK’s trade gap with the rest of the world in April was the lowest since March 2014 - both for goods alone and for goods and services taken together. This chart shows the UK trade balance from April 2013 to April 2015. Photograph: ONS

The April figures showed that much of the growth in exports came from sales to countries beyond the UK’s key market, the European Union. That will reassure businesses who have been looking to emerging markets and the US for trade as the eurozone continues to suffer from shaky business and consumer confidence.

With signs that eurozone growth is now picking up, prospects for UK trade and the broader economy were looking brighter, said Howard Archer, economist at the consultancy IHS Global Insight.

“The April trade data show considerable improvement, thereby raising hopes that net trade may well help UK GDP growth to improve in the second quarter,” said Archer.



“While UK GDP growth will clearly remain largely reliant on domestic demand, the hope has to be that exports will increasingly benefit over the coming months from improved eurozone growth. However, the strength of the pound against the euro threatens to continue to constrain the upside for UK manufacturing exports to the eurozone.”

The pound has strengthened against the single currency since the start of this year, making UK goods more expensive to eurozone buyers.

The ONS said the deficit for trade in goods and services together also narrowed to its lowest since March 2014, to stand at an estimated £1.2bn this April from £3.1bn the previous month. The UK runs a surplus in the trade of services, which covers activities like banking and legal services.



Within trade in goods, exports rose £0.7bn, of which £0.6bn was attributed to countries outside the EU. Imports of goods fell by £1.5bn.

Statisticians caution that monthly trade figures can be volatile and they recommend looking at three-monthly numbers to get a more accurate picture. On that basis the UK’s trade deficit widened.

In the three months to April, the goods and services trade gap was an estimated £7.2bn, widening by £1.6bn from the three months to January 2015. The goods deficit also widened, by £1bn to £30bn, after a £1.9bn fall in exports, largely down to lower oil exports.

The breakdown of where UK exports go continued to show strong reliance on the EU. Four of the UK’s top five export markets – US, Germany, Netherlands, France and Ireland – are EU members, noted Michael Saunders, economist at Citi bank. That would have a strong bearing on the debate around Britain’s possible break away from the EU depending on the outcome of an upcoming in/out referendum.

“Only one emerging market country, China, ranks in the UK’s top 10 export markets. The UK’s high export exposure to the EU – and resultant possible adverse effects on the UK economy from EU exit – are likely to feature heavily in the run-up to the EU referendum planned for 2016-17,” said Saunders.

UK top 10 markets