THE UK’s current account deficit was larger than expected in the final quarter of last year, official figures have shown. The deficit in the three months to December was £22.4bn, only marginally lower than the all-time high of £22.8bn recorded in the previous quarter.
Economists had expected the UK’s deficit to narrow to about £14bn in the final three months.
The current account deficit for the year was £71.1bn, equal to 4.4% of UK GDP and slightly lower than the highest current account deficit of 4.6% of GDP recorded in 1989, the Office for National Statistics (ONS) said.
The UK’s trade deficit with the rest of the world – the difference between the value of goods and services the country imports versus what it exports – narrowed to £5.7bn in the fourth quarter from £10bn three months earlier, the ONS said.
The fall in the trade deficit was partly attributed to Britain’s dominant service sector, which accounts for nearly 80% of UK economic growth, which recorded a surplus in the quarter of £1.4bn.
The UK’s trade deficit in goods also narrowed by £3bn. But this was the result of falling imports rather than any increase in exports.
Imports fell by £3.4bn in the period, the ONS said. Imports of oil, semi-manufactured goods and finished manufactured goods fell by £1.4bn, £1bn and £0.9bn respectively.
The value of UK exports fell by £0.4bn.
The UK’s income account, the income from its overseas investments compared with the return other countries receive on their investment in the UK, recorded a deficit of £10.3bn in the quarter.
The ONS said the deficit in the income account was due to the pound strengthening against other currencies during the period.
• The UK’s economy grew by 1.7% last year, official figures show, less than the previous estimate of 1.8%.
It is the second time the estimate for GDP growth in 2013 has been cut, after an initial estimate of 1.9%. At the end of 2013, the size of the UK economy remained 1.4% below its pre-downturn peak reached at the beginning of 2008, the ONS said.
In the final three months of 2013, the ONS said that ‘growth in the services industries remained the strongest contributor’ to the economy, increasing by 0.8% during the period.
• The developing housing bubble was exposed again yesterday when the Land Registry revealed that house prices rose by 13.8% in the year to the end of February in London, but fell by 1.3% in north-east England.
The average home in England and Wales cost £170,000 in February, the Land Registry said.
Price rises in London soared above this annual average increase, with a home in the UK capital typically valued at £414,356.
These figures come the day after the Bank of England said it would test whether lenders could withstand a shock in the property market. It found buyers were spending a higher proportion of their incomes on mortgages than at any time since 2005.
The bank’s Financial Policy Committee (FPC) said it would be ‘vigilant to emerging vulnerabilities’ – in other words, the possibility of a housing bubble burst.
The coming rise in interest rates is expected to do just that.