A nice outline of why the UK is so much more relaxed about goods deficits than the US? And given record deficits last year, whether it should be?
www.ft.com/content/af9b...
Because the services surplus has also reached record highs, offsetting some of the deterioration in the goods deficit. The UK has benefited from growing global services imports - and this is set to continue with services rising from 25% to 31% of global trade by 2050.
But the 'good' news, despite deteriorating in 2025, the trade deficit is just 1.5 per cent of GDP - a similar level to much of mid-2010s and below the early-2000's. Why?
The UK goods deficit hit record high in 2025 (in values and volumes terms). This in part reflects the flatlining of goods exports over the last decade: "the volume of UK goods exports last year was still smaller than in 2014".
www.ft.com/content/870d...
FT exclusive | UK quietly shelves £110mn frictionless post-Brexit trade border project ft.trib.al/n5uCr9G #FTEdit
The report sets out 3 key areas the Government could and should be bolder: trade, housing policy and labour-market participation.
And you can rewatch today's event on this report, where we heard from Sir John Kingman and Dr Catherine Thomas here:
www.resolutionfoundation.org/events/kicki...
On reform: planning, regulation, skills and devolution all point in a pro-growth direction but businesses remain unconvinced and investment expectations weak. So while directionally right, it has been too cautious given the mountain to climb.
On investment: the Government has rolled back cuts to public investment and set out industrial, trade and pension reforms. While the intent is sound, defence spending has absorbed much of the headroom, leaving pro-growth areas like transport and R&D flat or falling as % of GDP.
Despite measures to enhance fiscal credibility, economic policy uncertainty remains high (2nd only to the Brexit-vote Parliament when global factors are excluded). Big tax/spend changes, low headroom (until recently), and substantial U-turns have hindered stability efforts.
Against this backdrop, the Government’s growth plan rests on 3 pillars:
1️⃣ Restore stability
2️⃣ Increase investment
3️⃣ Reform the economy
There has been important progress against all 3 pillars, there have also been significant missteps.
There are tentative green shoots. Productivity has grown ~3.4% in 18 months, a rate not seen since pre-financial crisis. And there are signs of improved economic dynamism: much needed creative destruction may finally be returning, but it bring unemployment risks with it.
This isn’t just a global slowdown. The UK has fallen behind its peers. With post-pandemic, employment growth no longer making up for weak productivity in the UK.
And this has left UK GDP per person just behind Italy, having been 8 per cent higher before the pandemic.
The UK’s growth problem is immense. GDP per person is just 0.8% higher than before the pandemic - meaning the economy took 6 years to grow what used to take ~7 months based on pre-pandemic growth trends.
New report published assesses the UK’s growth challenge 18 months into the current Parliament, examining how economic performance has evolved since the pandemic and evaluating the Government’s progress against its central mission to raise growth.
www.resolutionfoundation.org/publications...
So while a monthly rebound in US exports drives a tick up in UK exports in October, big picture is US exports remain depressed in 2025. And worryingly, instead of acting as a stabiliser to disrupted goods trade, the slowdown in services exports has continued in October.
And this matters because services trade has been holding strong post-Brexit while goods trade has plummeted. And in a world where policy around goods trade looks to remain volatile, services trade has the potential for a more stable outlook.
As flagged previously, what is worrying in the rapid slowdown in services export growth. 3-month on 3-month change is now flat - with volumes starting to fall.
Monthly non-EU goods export growth was driven by a rebound in US trade (+27%) - notably in chemicals (+75%) and cars (+100%). But as shown, exports in both sectors remain below Oct-2024 levels. And total US exports in 3 months ending Oct-2025 remain 13% below 2024 levels.
So as shown below, there was strong monthly growth in non-EU goods exports (up 8.6%). Goods exports (excl. precious metals) to the EU and goods imports from both the EU and non-EU all grew 1-2% on the month. The value of services trade remained largely flat on the month before.
ONS monthly trade data today shows exports grew 5.2% in October, thanks to a strong monthly rebound in US exports. Imports grew just 1.5% and services trade growth was once again almost zero.
📻 Coming up at 4pm today on BBC Radio 4
CPC-CG Director @janefalkingham.bsky.social @uosmedia.bsky.social will discuss #intergenerational #economic justice, with CPC-CG's @sophiehale.bsky.social @resolutionfoundation.org, + @bobbyduffy.bsky.social & @xiaoweixu.bsky.social @theifs.bsky.social ⬇️⬇️
Inevitably, there are already arguments that the Chancellor should cut welfare spending instead of raising taxes tomorrow. But is welfare spending really 'out of control'?
Here's the facts:
www.resolutionfoundation.org/comment/is-w...
The spotlight is on how UK goods exports are reacting to US tariffs — and so far, the answer is: pretty badly. But the quieter, equally important story is the cooling in services trade. Both shifts matter for the UK’s increasingly fragile trade mix, and must not be overlooked.
The fall in UK goods exports is broad-based as is the underperformance of UK exports to the US. Q2 + Q3 exports of chemicals, machinery & transport and misc. manufactures all fell more than 10% with the US, while cars exports to the US have plummeted by more than third vs 2024.
However, it's not just a US story. Goods exports excluding the US also fell compared to last year - down 1.3% in Q2 + Q3 vs the year before.
And no clear benefits materialising (yet) from securing lower tariffs with the US than many of its other major trading partners.
Turning back to the UKs goods exports performance, it is clear US tariffs are playing a role. Exports to the US have plummeted - 12% lower in Q2 + Q3 than the previous year. This looks worse than the relevant March OBR estimate (scenario 2) of a short-run 8% fall.
Services exports have been the clear hero in the UK trade story post-Brexit. And so slowing services trade growth is worrying - average quarterly growth has been just 1% so far in 2025 vs 4% in 2024.
The value of Q3 goods exports fell 0.7% compared to Q2, and this was due to particularly weak non-EU trade which fell 1.5% (while exports to the EU were largely flat). Services trade growth was also relatively weak, with both imports and exports inching up around 0.2%.
Quarterly trade data out this morning. Goods exports were down 0.7% compared to Q2, with weak USA exports certainly contributing. In addition, services trade growth seems to have slowed, with growth of just 0.2%.
The idea that the UK benefits is plausible — but unlikely, for two reasons:
1. It likely underestimates US capacity and intent to onshore, given other active policies to pull investment home.
2. UK firms need to believe these tariff advantages are lasting — a risky bet.
