Business World

Sunday 23 October 2016

UK deficit balloons to €41bn even as economy grows

William Schomberg

Published 01/04/2016 | 02:30

Bank of England Governor Mark Carney
Bank of England Governor Mark Carney

Britain's current account deficit widened much more than expected to hit a record high, highlighting one of the economy's weak spots that is coming under sharper focus ahead of the European Union membership referendum.

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Britain's Office for National Statistics said yesterday that the deficit in the current account widened to £32.7bn (€41bn) in the fourth quarter of 2015, shooting up to the equivalent to 7pc of gross domestic product.

The deficit had stood at 4.3pc of GDP in the third quarter.

Economists taking part in a Reuters poll had expected the shortfall to widen to £21.1bn in the October-December period.

For 2015 as a whole, the current account deficit stood at £96.2bn or 5.2pc of GDP, also the biggest since records began in 1948.

The Bank of England has said it will watch for signs that the EU membership referendum, due to take place on June 23, might make it harder for the country to finance the shortfall in its balance of payments.

Sterling has weakened sharply since the start of year on concerns about the outcome of the EU referendum.

BoE Governor Mark Carney has said a vote to leave the bloc would test the "kindness of strangers".

Britain's current account deficit reflects not only the shortfall in its trade balance but also the higher outflows of dividends, bond payments and other returns to investors outside the countries compared with inflows the other way. That imbalance has grown as Britain's economy has expanded more strongly than many other countries over the past three years.

Britain's economy grew 0.6pc in the fourth quarter and was up 2.1pc than in the fourth quarter of 2014. (Reuters)

Irish Independent

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