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Exports to the EU appear to have recovered in March, easing fears of a sustained impact to trade with the continent brought on by the new post-Brexit trade relationship.
Exports of goods with the EU increased by £1.0BN (8.6%), driven largely by car exports says the ONS.
The ONS adds the total exports of goods increased in March 2021, with increases seen in trade with both EU and non-EU countries.
"Good news is that disruption stemming from the abrupt arrival of the UK-EU trade deal in January appears to have eased," says James Smith, Developed Markets Economist at ING Bank.
The findings suggest the UK's trade position with the rest of the world is improving and should go some way to quell fears over the countries persistent current account deficit, which is said by currency analysts to be an anchor on long-term Pound Sterling valuations.
Fundamental support for a currency is derived from a country's ability to export more than it imports, leaving it less dependent on investor capital flows.
An interesting statistic was reported by the ONS in that the UK imported more goods from non-EU countries than from the EU during the first quarter of 2021, the first time it had done so since records began in January 1997.
The findings made by the ONS show that the import of goods from non-EU countries, excluding precious metals, increased by £1.5BN (8.4%) in March 2021; mainly driven by imports of clothing.
Imports of goods from the EU, excluding precious metals, stood at £0.8BN (4.5%) in March 2021.
The boost in exports meant the UK recorded a smaller than expected trade deficit in March at -£11.71B, which is less than the -£14.40BN markets were anticipating.
The trade balance with non-EU countries rose to -£6.55BN in March, deeper than the -£3.50BN markets were expecting.
Image courtesy of ING.
Smith says exports to the EU – arguably the better barometer of difficulties, given most of the frictions so far have been on the EU-side – have recovered close to where they were at the tail end of last year.
He says this tallies with recent ONS survey data, which has shown a marked fall in the number of ‘exporting’ manufacturing firms reporting challenges with UK or overseas border disruption over recent weeks (though some of this may be Covid-related).
However ING do caution that a small chunk of firms are still struggling with the changes to the EU-UK trading relationship.
"Trade data still shows things like food/live animal exports lagging more heavily behind late-2020 levels, reflecting higher levels of paperwork and transportation issues being experienced by the sector. Things are likely to become trickier again for various sectors when the UK government introduces full customs requirements from late-2021/early 2022," says Smith.
ING tell clients there will continue to be a slow-burning impact of new trade frictions on the UK economy, even if the immediate teething problems have passed.