Trade In Services Surplus Slightly Down

The Balance of Payments bulletin from the ONS for the first quarter of 2010 reported a current account deficit of £9.6bn as compared with a current account surplus of £0.5bn in Q4 2009. It is mainly due to a lower surplus on income, from £8.1bn to £3.8bn, and an increase of £1bn in deficit on current transfers, an increase of £0.5bn in trade in goods and a lower surplus on trade in services of £0.5bn to £12.5bn. The current account balance is equivalent to -2.7% of GDP.

The deficit in trade in goods and services equals -2.5% of GDP and the surplus on income is 1.1% of GDP. Trade in goods is in deficit by £21.7bn. Exports went up by £1.6bn and imports by £2.2bn. The semi-manufactured goods trade deficit increased by £0.8bn to £1.6bn and finished manufactured goods increased their deficit by £0.2bn to £13.5bn. The deficit in trade in oil narrowed by £0.4bn. The trade deficit in food, beverages and tobacco decreased by £0.3bn to £4.2bn.

The surplus on trade in services was £12.5bn, sightly lower than Q4 2009. Exports of services fell by £0.7bn to £39.1bn mainly due to a fall in the export of financial services, royalties and license fees and construction services. Imports fell by £0.2bn due to decreases in government services and construction services. These were partially offset by an increase in the import of financial services of £0.3bn.

The surplus on income fell to £3.8bn from £11.9bn in the previous quarter. Income credits were £41.5bn due to increased earnings on direct investment abroad. Income debits increased by £8.2bn to £37.6bn due to earnings on increased direct investment in the UK. Portfolio investment in the UK earnings increased by £1bn from £2.4bn to £3.4bn. UK earnings on portfolio investment abroad fell by £0.1bn to £11.6bn. The compensation of employees was £0.2bn. The surplus on direct investment income was down £6.6bn to £10bn. Earnings on direct investment abroad were £22bn due to monetary financial institutions going to profit from loss and increased earnings by financial intermediaries. Foreign earnings on direct investment in the UK increased by £7.7bn to £11.9bn. Foreign earnings on portfolio investment in the UK rose by £1bn to £15.1bn. Income on reserve assets was £0.2bn.

The current transfers deficit increased to £4.3bn due to an increase in UK's payments to EU institutions. The capital account showed an increase of £0.3bn to leave a surplus of £1.2bn.