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UK trade performance falls to worst level on record in first quarter

The UK’s trading performance fell to its worst level since records began in the first quarter of 2022, putting more pressure on sterling in international currency markets.

Although the Office for National Statistics warned that the figures it published were “subject to greater uncertainty than usual”, the new system it used to collect the trade data based on customs data was chosen because it was thought to be more accurate.

The weak performance of UK exports and a sharp rise in imports will add to pressure on the government over the damaging economic effects of Brexit as official figures confirm academic studies showing a rift in UK exports since the new border controls in 2021 were set.

The data showed The UK’s current account deficit stood at 8.3 percent of gross domestic product in the first quarter of 2022, down from an average of 2.6 percent over all quarters in 2021.

That was the worst figure ever since the publication of the balance of payments data in 1955.

Part of the decline came from movements in gold and other precious metals, which have little to do with normal trading relationships. Excluding these volatile elements, the current account deficit rose from an average of 2.4 percent of GDP in 2021 to 7.1 percent in the first quarter of this year.

Most of the current account deficit stems from a record imbalance between imports and exports, but there were also shortfalls in investment income and money transfers between countries.

The ONS said it examined the large surge in imports, along with foreign direct investment, and advised caution in interpreting the very poor data.

Paul Dales, chief economist at Capital Economics, said the most notable elements in the figures were a 4.4 percent drop in real exports and a huge 10.4 percent jump in real imports.

“Early this year, the ONS started measuring imports between the UK and the EU in a slightly different way,” resulting in a “big step up,” Dales said, adding that the numbers were “very difficult to interpret”.

Samuel Tombs, the UK’s chief economist at Pantheon Macroeconomics, called “a sharp rise in energy prices” the main cause of the UK’s problems.

He echoed former Bank of England governor Mark Carney, who repeatedly warned after the Brexit referendum that the value of the pound depended on the “kindness of strangers”.

Tombs said: “The ill effects of the UK’s reliance on external financing stemming from the large current account deficit have become apparent over the past month, with the pound depreciating sharply as global investors have collectively shunned risky assets”.

The pound, which was stable in foreign exchange markets Thursday morning, has lost more than 10 percent of its value against the US dollar over the past year, while it has remained largely stable against the euro.

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