UK Record Trade Deficit

In the three months from July to September, the UK recorded its worse current account deficit in history at 5.7% of GDP - a higher % than the US whose economy runs ahead of ours.

In fact, whilst the UK economy was growing the then Chancellor (now PM) should have really been squiraling it all away for a rainy day rather than spending what he didn’t have. It was the same situation after the last Labour government in the late 70s - it took the first term of Thatcher’s government to attempt to turn around the waste that Labour stands for.

All economists agree we are running into a complete and prolonged nightmare. The current credit crunch is in play whilst spending plans continue unabated. And the last time there was a problem like this a long recession followed to correct it.

As Ewen Davis at the BBC says “…But mostly when the balance of payments deficit is large it is telling us that the British are borrowing and spending heavily, thus relying on imported goods. And that is a good deal of the story at the moment (other data released today showed the household savings ratio falling).”

The interesting thing is this data is before the current credit crunch crisis which has yet to play into any of the data - even the retailers are having early sales now that are much earlier than even and with deeper discounts showing that the issues are already around. Even with the recent reduction in the Bank of England base rate, not many mortgages fell as the cost of borrowing between the banks themselves has not yet fallen.

Luckily employment is holding up but the people running this country are trying to spend themselves out of a potential recession.