UK current account deficit widens, business investment falls | Fin24
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UK current account deficit widens, business investment falls

Dec 21 2018 11:57
Lucy Meakin, Bloomberg

The UK current-account deficit stood at its highest in two years in the third quarter, raising fresh questions about its sustainability as Britain faces the prospect of a chaotic exit from the European Union in less than 100 days.

The gap grew for a third straight quarter to £26.5bn, the equivalent of 4.9% of gross domestic product. The Office for National Statistics left its estimate of  GDP growth at 0.6% as consumers made up for a third straight fall in business investment and a negligible contribution from trade.

Key insights

Brexit has put the current account back in the spotlight, with economists questioning the willingness of foreign investors to keep financing the deficit by buying British assets after Britain leaves the EU.

The gap widened from £20bn in the second quarter as the trade deficit hit a two-year high and the shortfall in investment income reached the highest since the second quarter of 2016. Sharp negative revision to trade deficit means net trade contributed just 0.1% point to economic growth in the third quarter, rather than 0.8%.

The economy grew 1.5% from a year earlier. But signs are pointing to a significant economic slowdown, with the Bank of England predicting growth of around 0.2% this quarter. Business investment fell 1.1% (revised from 1.2%) between July and September amid mounting Brexit fears.

The budget deficit narrowed to £7.2bn in November, below forecasts, with revenue and spending including investment both growing just under 4% on the year. The shortfall in the first eight months of the fiscal year was down over 29% versus the same period in 2017.

eu  |  uk  |  brexit  |  economy


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