Cycle of despair takes turn for the worse The balance of payments problem is back, report Larry Elliott, Ruth Kelly, Simon Beavis and James Nicholson

• Published in: The Guardian (London)
• Main Authors: LARRY ELLIOTT, RUTH KELLY, SIMON BEAVIS, Nicholson, James
• Format: Newspaper Article
• Language: English
• Published: Manchester (UK) Guardian News & Media Limited 25.03.1994
• ISSN: 0261-3077

While the overall picture is depressing enough, the underlying trends are even more worrying. First, there is the changing make-up of UK visible trade. Until the 1970s, Britain used to run a surplus on manufactured goods and services which helped to offset the deficit in food and fuel. North Sea oil changed all that. The surge in production in the 1980s disguised the run-down in manufacturing, and indeed hastened the decline by pushing up the value of sterling, making non-oil exports more expensive. In 1983, Britain suffered its first deficit on manufactured goods in its history, and has been in the red ever since. The second cause for concern is the relentless rise in import penetration, the proportion of total expenditure in the UK accounted for by foreign goods and services. It would be wrong to imagine that this is a phenomenon unique to Britain, since the increased specialisation of the global economy has led to higher import penetration across the developed world. But in the UK it has been sharper than elsewhere, rising by 3.1 per cent a year between the mid-1970s and 1990, according to a peak-to-peak comparison by the Organisation for Economic Co-operation and Development. The comparable figures from the US and Germany were 2.8 per cent, and for Japan 2.7 per cent.