Trade Deficit Improves

Unexpectedly good news relating to the trade deficit has been reported by the Office for National Statistics (ONS).

Britain's trade deficit narrowed in June to £7.4BN, as a result of exports rising at four times the pace of imports.

However, the country still has a trade deficit and the figures are somewhat out of date (ie they are June's). Additionally, the ONS is not renowned for its accuracy and it is likely the the figures will be revised at some point in the future.

As I have noted before, using out of date inaccurate figures to run the economy (or even to try to make people "feel good") is questionable to say the least.

Trade Gap Widens

Despite the fact that the Pound has fallen in value, relative to other currencies, Britain's trade gap with the rest of the world unexpectedly widened during January to £7.987BN.

City "experts" had expected a deficit of £7BN.

The unexpected news served to push Sterling lower, which in theory should actually help exports.

It seems, so the story goes, that the poor weather in January was to blame for the deterioration. However, were that to really be the case then imports would have been affected as well. The fact that the gap widened, means that imports were not so seriously affected affected by the weather as exports.

The Pre Budget Report

As Alistair Darling steps up to deliver his "Pre Budget Report", and probably implement an unworkable "bankers' bonus tax" (see below an article from today's HMRC Is Shite), the Office of National Statistics (ONS) reports that Britain's goods trade deficit worsened unexpectedly in October from £6.9BN to £7.1BN (the largest gap since January).

This fall raises uncomfortable questions over the UK's ability to pull itself up out of recession in Q4 this year.

To add to the pressure on Darling, Moody's warned that unless he acts swiftly to reduce the debt the UK's AAA rating will be reduced.

Article from HMRC Is Shite

Good luck to HMRC in trying to levy a "bankers' bonus tax", in the event that Darling implements one in his "Pre Budget Report" today.

Disregarding the fact that taxing one specific "class" of worker is contrary to the concept of taxes being non discriminatory, the tax will be unworkable:

1 There will be a wholesale exodus of banks, other financial institutions and individuals from the UK.

2 What is the definition of a "banker"? Those who currently fall into Darling's definition of "banker" will simply have their employment status/title changed, to eg "admin clerk".

3 Pay rises will be backdated to mop up the bonus pool.

The tax will be shot to pieces, and HMRC will be forced to waste valuable time and resources trying to "pin a tail on the donkey" of the bankers.

Exports Unresponsive

Despite the fall in the value of Sterling, statistics (if they can be relied upon) show that Britain's trade deficit grew from £7.6BN in October to £8.3BN in November.

In theory a falling pound should stimulate exports, and curtail imports.

One small piece of positive news is that shoppers from the Continent are flocking to London to snap up bargains.

Richard Brown, the chief executive of Eurostar, is quoted in The Times:

"We are an international business, and while the pound is weak, that means that London is much cheaper for people coming from France and Belgium, so we have seen 15 per cent and more growth in visitors coming to London, a lot of them using our shops and buying stuff here in London."

Let us trust that the bargains that they are purchasing are British, and not foreign imports.