A country’s trade performance can change over time. Its balance of payments figures can
help to provide an indication of where an economy’s strengths and weaknesses might lie
and which might ultimately require governmental action (e.g. import controls or export
subsidies). Table 10.5 gives a summary of the balance of payments in the UK over the
last ten years. The table shows that the current account was in deficit from 1992 until
1997, when it went into surplus for two years before returning to deficit in 1999. The
weaknesses on the current account pre-date this and are somewhat hidden in the overall
figures. The current account deficits started in 1987; the visible balance has been in
deficit (and still is) since 1983 and within this the non-oil balance has been in deficit
since 1982. This did not show in the overall current account figures until 1987 because
of the offsetting effect of invisibles and oil. The UK’s underlying weaknesses on the current
account came from several sources:
1 While exports rose during this period, imports have risen faster. In the UK, there has
been a high propensity to import goods.
2 The collapse of oil prices reduced the value of the UK’s oil exports.
3 The recession of the early 1980s left the UK’s manufacturing base in an extremely
weak position. This meant that it was difficult to produce enough goods for export or
even to meet domestic demand so the balance of payments was hit from both directions.
Changes in the industrial structure of the UK have implications for the balance
of payments, as services are less exportable than goods.
4 The consumer boom that occurred in the late 1980s after the budget of 1986 led to an
increase in the level of imports.