Trade and the current account

Reviewed 14 October 2026

Okenitemode explains how UK indicators are built and read. Nothing on this page is a forecast, a recommendation, or a substitute for the official statistical bulletin. Worked numbers below are invented so the arithmetic is visible. They are not Office for National Statistics figures.

Goods are not the whole of trade

Trade in goods is the tangible part: machinery, cars, food, fuels, chemicals. It is the part a port photograph suggests, and it is often in deficit in the UK. Trade in services covers finance, professional work, education, tourism, creative industries, and a long list of things that do not sit in a container. The UK has typically run a surplus in services. A goods deficit beside a services surplus is a normal shape for this economy, not an emergency by itself.

Imports are subtracted in the expenditure measure of GDP because they were not produced here. That accounting step is not a moral judgment that imports are a failure. A factory that imports a component and exports a machine can be a success and still show a goods import.

The current account identity

The current account adds three broad pieces:

• The trade balance, goods and services together.
• Primary income: profits, dividends, and interest flowing between UK residents and the rest of the world.
• Secondary income: transfers such as some remittances and official contributions, where nothing is received directly in return.

A fictional quarter, in billions: goods deficit 8, services surplus 5, primary income deficit 1, secondary income deficit 1. The trade balance is minus 3. The current account is minus 5. Anyone who quoted only the goods deficit of 8 has overstated the external gap, and anyone who stopped at trade has missed the income lines. The figures are invented to show the addition.

A current-account deficit means residents are, on net, spending more than their income from production and foreign income, and the gap is matched by financial flows from abroad. It is not a bill that arrives in the post. Whether a given deficit is comfortable depends on what the borrowing funds and on whether the capital is likely to stay. The accounts do not answer that in a single number.

Distortions worth naming

Erratic items can shove the monthly goods balance around. Non-monetary gold and other precious metals are a known example in the UK data: they can move the goods total without telling you much about factories or high streets. The ONS often shows totals excluding precious metals for that reason. The so-called Rotterdam effect is another: goods that land in one European port and are recorded as trade with that country may be destined elsewhere. Read the trade bulletin’s own notes before you build a story about a partner country from one month.

Revisions to trade, especially services, are large. Services are harder to survey than goods that pass a customs declaration. An early services surplus is an estimate.

Sterling is the relative price

The exchange rate translates foreign and domestic prices. A sterling effective exchange rate index averages sterling against the currencies that matter for UK trade, with weights. It is more informative than a single pair such as sterling-dollar if the question is about overall competitiveness. A fall in sterling makes exports look cheaper in foreign currency and imports dearer at home, with a lag, and it can raise CPI through import prices. It is not, by itself, a verdict on the current account. For the monetary side of the exchange rate, see Bank Rate and gilts.