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Understanding recent developments in UK external trade

Author

Listed:
  • Kamath, Kishore

    () (Bank of England)

  • Paul, Varun

    () (Bank of England)

Abstract

The sterling effective exchange rate depreciated by around 25% between mid-2007 and early 2009. That has encouraged a shift towards UK exports and away from imports, contributing to a significant narrowing in the United Kingdom’s real trade deficit. This article explains these developments in more detail. It shows that the depreciation has induced considerable switching of expenditure by overseas companies and households towards UK goods exports, and by UK residents away from travel services imports. But financial services exports appear to have suffered from the financial crisis. And there seems to have been less of a response to the exchange rate depreciation in other services exports and non-travel imports. Looking ahead, both the level of sterling and developments in the rest of the world are likely to be crucial to the United Kingdom’s trade performance.

Suggested Citation

  • Kamath, Kishore & Paul, Varun, 2011. "Understanding recent developments in UK external trade," Bank of England Quarterly Bulletin, Bank of England, vol. 51(4), pages 294-304.
  • Handle: RePEc:boe:qbullt:0062
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    References listed on IDEAS

    as
    1. Burgess, Stephen, 2011. "Measuring financial sector output and its contribution to UK GDP," Bank of England Quarterly Bulletin, Bank of England, vol. 51(3), pages 234-246.
    2. Simon Wren-Lewis & Rebecca Driver, 1998. "Real Exchange Rates for the Year 2000," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa54.
    3. Nigel Pain & Annabelle Mourougane & Franck Sédillot & Laurence Le Fouler, 2005. "The New OECD International Trade Model," OECD Economics Department Working Papers 440, OECD Publishing.
    4. Leland Crane & Meredith A. Crowley & Saad Quayyum, 2007. "Understanding the evolution of trade deficits: trade elasticities of industrialized countries," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-17.
    5. Ray Barrell & Amanda Choy & Simon Kirby, 2006. "Globalisation and UK Trade," National Institute Economic Review, National Institute of Economic and Social Research, vol. 195(1), pages 63-67, January.
    6. Nigel Pain & Desirée van Welsum, 2005. "International Production Relocation and Exports of Services," OECD Economic Studies, OECD Publishing, vol. 2004(1), pages 67-94.
    7. Alan V. Deardorff & Saul H. Hymans & Robert M Stern & Chong Xiang, 2000. "Forecasting U.S. Trade in Services," Working Papers 467, Research Seminar in International Economics, University of Michigan.
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    Citations

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    Cited by:

    1. Berry, Stuart & Corder, Matthew & Williams, Richard, 2012. "What might be driving the need to rebalance in the United Kingdom?," Bank of England Quarterly Bulletin, Bank of England, vol. 52(1), pages 20-30.
    2. repec:eee:jbfina:v:87:y:2018:i:c:p:150-163 is not listed on IDEAS
    3. Chowla, Shiv & Quaglietti, Lucia & Rachel, Lukasz, 2014. "How have world shocks affected the UK economy?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 167-179.
    4. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.
    5. Agyei-Ampomah, Sam & Mazouz, Khelifa & Yin, Shuxing, 2013. "The foreign exchange exposure of UK non-financial firms: A comparison of market-based methodologies," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 251-260.

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