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Trade gap increase dampens business spirits
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UK businesses need to focus on tapping in to foreign markets where possible, in order to boost the economic recovery, it has been suggested.
David Kern, chief economist at the British Chambers of Commerce, highlighted the importance of establishing closer business ties with faster growing markets around the world.
He said that increased trading with Brazil, Russia, India and China will be particularly important over the coming years, as these resource-rich nations form a new economic elite.
"While low interest rates and a competitive pound will help to reduce our deficit, British exporters must reinforce their efforts to break into faster growing markets," Mr Kern added.
The economist was speaking after the UK's trade gap rose to £3.4 billion in February, as reported by the Office for National Statistics.
This meant the value of UK imported goods was far in excess of those manufactured in Britain and exported overseas.
In January, the trade gap stood at just £2.5 billion, so the increase in imports relative to exports will disappoint those hoping for a manufacturing-led recovery.
Mr Kern explained that the volume of exporting goods fell by more than five per cent in February, while imports declined by less than one per cent.
"Although the monthly trade figures can be volatile, and not too much weight should be given to one single figure, it is clear that the rebalancing of the economy towards exports is too slow," he added.
The BCC expert said that with the government's deficit cutting measures squeezing domestic demand, a sustained UK recovery relies on exports, business investment, and replacing imports with domestically-produced goods.
"Given the renewed debt problems in the eurozone and difficulties in the global economy, British exporters will face challenges in maintaining their position in international markets," he stated.
"The government must act to address these issues by giving small- and medium-sized firms in particular extra support in key areas such as trade finance, insurance, promotion, market knowledge and skills."
Mr Kern said it is "crucial" to enable British firms to compete on equitable terms.
Posted by Stephen Wilkinson
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