Brexit negotiators urged to safeguard terms of trade with EU amid signs UK becoming more dependent on deals with bloc

Britain’s trade position with the rest of the world worsened in June as the sharp fall in the value of the pound since the Brexit vote failed to lift sales of UK-made goods abroad.

The trade in goods deficit widened unexpectedly to £12.7bn, from £11.3bn in May, as exports fell by 2.8% but imports rose by 1.6% according to the Office for National Statistics. It was the biggest deficit in nine months and much wider than economists’ forecasts of £11bn.

The figures are the latest sign that a weak pound is failing to boost exports, despite making British goods cheaper abroad. The pound is 13% lower against the dollar than it was on the day of the EU referendum, at $1.2988. It is down 15% against the euro, at €1.1052.

Weaker exports in June were driven by a 7.9% fall to countries outside the EU, while goods exported to EU member states rose by 2.7%.

“The UK is becoming more and not less dependent on the European Union, whatever the result of the referendum last year,” said Edward Hardy, an economist at World First. “The numbers are a firm signal that the continent is still the place to be for selling overseas and making the most of the weaker pound.”

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But he said UK corporations were still not seizing the opportunity, with the weaker exchange rate yet to feed through to higher exports, as well as being countered by a booming import trade.

The broader deficit in goods and services – which includes imports and exports of services such as banking and legal advice – increased by £2bn in June to £4.6bn, as imports rose by 3.3% but exports fell by 0.7%.

In the second quarter overall, the goods and services deficit widened slightly by £100m to £8.9bn, as increases in exports were closely matched by increases in imports.



Suren Thiru, the head of economics at the British Chambers of Commerce, said the trade figures were disappointing and businesses needed more support from the government.

He said: “As the Brexit negotiations unfold, safeguarding the favourable terms of trade that UK firms currently enjoy with partners and markets in Europe and beyond must be a key priority. More must also be done to provide greater practical and frontline assistance to UK businesses looking to trade in both current and new markets.”

Separate figures on production and construction from the ONS confirmed the UK growth was sluggish in the second quarter, when the economy grew by 0.3%.

The National Institute of Economic and Social Research estimates the pace of economic growth slowed to 0.2% in the three months ending in July.

Amit Kara, the head of UK macroeconomic forecasting at the thinktank, said: “We see a modest recovery in the second half of this year in response to strengthening global growth and a weaker currency but, on the flipside, consumer spending is likely to be weighed down by weak wage growth and investment spending held back by Brexit-related uncertainty.”



The ONS figures showed UK manufacturing failed to grow in June, with output flat over the month following a 0.1% fall in May. The broader measure of industrial production, which includes mining and utilities as well as manufacturing, rose 0.5%, beating economists’ expectations of a 0.1% increase.



In the second quarter overall, industrial production fell by 0.4% compared with the first quarter. It was dragged down by a 0.6% fall in manufacturing, in part because of a sharp fall in car production.

Construction output fell by 1.3% between April and June, after growth of 1.1% in the first three months of the year.