By Andrew Dumble of the Bank’s Structural Economic Analysis Division.
This article examines why UK trade performance matters; in particular, it considers the factors which determine whether or not a current account deficit provides grounds for concern. It also looks at a number of longer-term trends in UK trade performance, and at the evidence of a structural improvement in manufacturing export performance from the mid-1980s onwards. These opening sections provide the context for an analysis of the impact on recent UK trade performance of two major developments - sterling’s depreciation following the suspension of UK membership of the exchange rate mechanism, and the recession affecting the United Kingdom’s main export markets in other EU states. The article concludes by examining some elements in the outlook for UK trade in the short term.