Balance of payments, UK: April to June 2023

• The underlying UK current account deficit excluding precious metals increased by £7.1 billion to £28.5 billion, or 4.2% of gross domestic product (GDP), in Quarter 2 (Apr to June) 2023.

• The UK current account deficit expanded to £25.3 billion, or 3.7 % of GDP, when trade in precious metals is included.

• In Quarter 2 2023, the total trade deficit excluding precious metals narrowed to £13.1 billion as the goods deficit narrowed to £51.3 and the services surplus narrowed to £38.2 billion.

• The primary income account recorded a deficit position of £10.3 billion, or 1.5% of GDP.

• Net financial flows increased in Quarter 2 2023, with a net inflow of £17.5 billion.

• The UK's net international investment liability position rose to £571.7 billion at 30 June 2023.

The UK's current account balance is a measure of the country's balance of payments with the rest of the world in trade, primary income and secondary income.

The underlying UK current account deficit excluding precious metals expanded to £28.5 billion, or 4.2% of gross domestic product (GDP), in Quarter 2 (Apr to June) 2023. This is a change of £7.1 billion from the previous quarter, when the deficit of £21.4 billion equated to 3.2% of GDP.

Trade

The total trade deficit decreased from £13.9 billion (2.1% of GDP) in Quarter 1 (Jan to Mar) 2023 to £13.1 billion (1.9% of GDP) in Quarter 2 2023. The trade in goods deficit decreased by £4.7 billion to £51.3 billion, or 7.6% of GDP. The trade in services surplus fell by £3.9 billion to £38.2 billion, or 5.7% of GDP from the previous quarter.

Figure 3: Imports of goods fell in Quarter 2 2023

Changes in imports and exports of goods, excluding unspecified goods, Quarter 2 (Apr to June) 2023 compared with Quarter 1 (Jan to Mar) 2023

Notes:

1. Caution should be taken when interpreting these data as HM Revenue and Customs changed the collection methods for EU trade in January 2021 and January 2022. For further details, see our Impact of trade in goods data collection changes on UK trade statistics: further update on Staged Customs Controls article and UK Trade bulletin. For more information, please see Changes affecting UK trade statistics in Section 7: Measuring the data.
2. Estimates for all time periods, from Quarter 1 1997 onwards, have been open for revision in this publication.

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The trade in goods deficit decreased to £51.3 billion in Quarter 2 2023 as imports fell and exports increased.

Goods imports fell by £3.4 billion to £147.1 billion. The largest falls were recorded in imports of other fuels which decreased by £2.7 billion, and imports of oil which decreased by £2.1 billion, as global gas prices continued to fall. These decreases were partially offset by an increase to imports of finished manufactured goods (£1.6 billion), along with imports of food, beverages and tobacco (£0.4 billion).

Goods export levels increased by £1.3 billion to £95.8 billion as exports of finished manufactured goods, which include machinery and transport equipment, increased by £3.3 billion compared with the previous quarter.

The trade in services surplus narrowed by £3.9 billion to £38.2 billion as increased imports in most service types were recorded in Quarter 2 2023. The largest of these was imports of other business services which increased by £1.4 billion, and transport services which increased by £0.8 billion.

Primary income

The primary income account records income the UK receives and pays on financial and other assets, along with compensation of employees.

The primary income account recorded a deficit position of £10.3 billion, or 1.5% of GDP, in Quarter 2 2023. Both credits and debits increased, but more so for debits because of larger non-residents' investments in the UK than UK residents' investments abroad.

UK earnings on direct investment abroad decreased by £3.4 billion to £34.2 billion as UK residents' retained earnings from investments abroad fell, while payments to foreign investors increased by £2.1 billion to £21.7 billion.

Portfolio investment recorded increases in both credits (£18.3 billion) and debits (£35.8 billion) in Quarter 2 2023.

Within other investment, earnings on both credits (£38.3 billion) and debits (£44.6 billion) continued to increase as interest rates around the globe increased. The profile of investments, with higher investment in the UK from overseas than the amount invested overseas from the UK, contributed to a widening deficit.

Secondary income

The secondary income account shows current transfers between residents and non-residents.

The secondary income deficit increased to 0.7% of GDP (£5.0 billion) in Quarter 2 2023, as other payments by general government increased by £0.8 billion.

A current account deficit, which the UK has experienced each year since 1984, places the UK as a net borrower with the rest of the world, indicating that overall expenditure in the UK exceeds national income. The UK must attract net financial inflows to finance its current (and capital) account deficit. This can be achieved through either disposing of overseas assets to overseas investors or accruing liabilities with the rest of the world.

The financial account recorded a net inflow of £17.5 billion in Quarter 2 (Apr to June) 2023, having recorded a net inflow of £6.7 billion in Quarter 1 (Jan to Mar) 2023.

UK resident foreign assets increased by £68.7 billion in Quarter 2 2023. This was mostly because of UK monetary financial institutions (banks) and other financial intermediaries increasing their portfolio investments overseas in shares and debt securities.

Net incurrence of UK liabilities increased by £86.1 billion in Quarter 2 2023. This was mostly because of non-residents investing in government stocks (gilts) as well as extending short-term loans to UK residents.

The international investment position (IIP) examines the UK's balance sheet with the rest of the world, measuring the difference between the net stock of assets and liabilities at a point in time which we report as the last day of each quarter.

The IIP recorded a widening in the value of its net liability position to £571.7 billion at the end of Quarter 2 (30 June) 2023 from £525.8 billion at the end of Quarter 1 (31 March) 2023. Note that the 31 March 2023 estimates were revised to incorporate the full set of foreign direct investment data, which was not available in our previous publication.

The UK asset position decreased by £27.4 billion in the three months to 30 June 2023, and was valued at £13,490.1 billion at the end of the period. The value of the UK liability position with the rest of the world increased by £18.5 billion to £14,061.8 billion.

The surplus stock levels in other investment narrowed, as UK residents withdrew deposits from overseas and foreign borrowers paid down some debts in the UK.

Balance of payments

The balance of payments is a statistical statement that summarises transactions between residents and non-residents during a period. It consists of the current account, capital account and financial account.

Current account

The current account is made up of the trade in goods and services account, the primary income account and the secondary income account. The difference in the monetary value of these accounts is known as the current account balance. A current account balance is in surplus if overall credits exceed debits, and it is in deficit if overall debits exceed credits.

Capital account

The capital account has two components: capital transfers and the acquisition (purchase) or disposal (sale) of non-produced, non-financial assets.

Capital transfers are those involving transfers of ownership of fixed assets, transfers of funds associated with the acquisition or disposal of fixed assets, and cancellation of liabilities by creditors without any counterparts being received in return. The sale or purchase of non-produced, non-financial assets covers intangibles such as patents, copyrights, franchises, leases and other transferable contracts, and goodwill.

Financial account

The financial account covers transactions that result in a change of ownership of financial assets and liabilities between UK residents and non-residents. For example, the acquisitions and disposals of foreign shares by UK residents. The accounts are presented by the functional categories of direct investment, portfolio investment, other investment, financial derivatives and reserve assets.

International investment position

The international investment position (IIP) is a statement that shows at the end of the period the value and composition of UK external assets (foreign assets owned by UK residents) and identified UK external liabilities (UK assets owned by foreign residents). The framework of international accounts sets out that the IIP is also presented by functional category, consistent with primary income and the financial account.

Precious metals

In line with international standards, the Office for National Statistics' (ONS's) headline trade statistics contain the UK's exports and imports of non-monetary gold. This trade can have a large effect on the size of and change in the UK's headline trade figures. This is because a substantial amount of the world's trade in non-monetary gold takes place on the London markets.

Further information on precious metals and their impact can be found in our UK trade bulletin.

Special drawing rights

Some International Monetary Fund (IMF) member countries have access to international reserve assets called special drawing rights (SDRs). A general allocation of SDRs, equivalent to approximately US $650 billion, became effective on 23 August 2021 and was allocated to participant countries in proportion to their existing quotas. The UK's SDR allocation was equivalent to $19,318 million and was received in August 2021.

Net errors and omissions

Although the balance of payments accounts are, in principle, balanced, imbalances between the current, capital and financial accounts arise from imperfections in source data and compilation in practice. This imbalance, a usual feature of balance of payments data, is labelled "net errors and omissions".

For more detailed definitions of terms used in the balance of payments, see our glossary (PDF, 123KB)

Data sources

Balance of payments statistics are compiled from a variety of sources, produced in the national accounts sector and financial accounts (SFA) framework. Some of the main sources used in the compilation include:

• overseas trade statistics (HM Revenue and Customs (HMRC))

• International Trade in Services Survey (ITIS) (Office for National Statistics (ONS))

• International Passenger Survey (ONS); this was suspended between March 2020 and January 2021 because of coronavirus (COVID-19)

• Foreign Direct Investment Survey (ONS and Bank of England (BoE))

• various financial inquiries (ONS and BoE)

• Ownership of UK Quoted Shares Survey (ONS)

Trade is measured through both exports and imports of goods and services. Data are supplied by over 30 sources, including several administrative sources, with HMRC being the largest for trade in goods. ITIS, conducted by the ONS, is the largest single data source for trade in services.

The main source of information for UK foreign direct investment (FDI) statistics is the Annual FDI Survey; separate surveys are used to collect data on inward and outward FDI. This is combined with data from the BoE on the banking sector. The statistics in this bulletin are compiled using the asset and liability measurement principle, which uses residency as the main distinction between outward and inward investments.

In line with our Developing foreign direct investment statistics: 2021 article, we have reviewed and developed the population and sampling frame of FDI businesses. These changes have been introduced for reference periods from Quarter 1 (Jan to Mar) 2020 onwards.

Changes affecting UK trade statistics

EU imports and exports of goods

In January 2022, HM Revenue and Customs (HMRC) implemented a data collection change affecting data on imports from the EU to Great Britain. This followed a similar data collection change in January 2021 for data on exports of goods to the EU from Great Britain.

We have applied adjustments to our estimates of goods imports from the EU for 2021to reflect this data collection change, which brought imports and exports statistics onto a like-for-like basis in 2021. These adjustments were applied in line with the National Accounts Revisions Policy to the balance of payments and our GDP quarterly national accounts, UK: July to September 2022 bulletin, and incorporated into our UK trade: November 2022 bulletin on 13 January 2023. We published an article alongside our UK trade bulletin on 13 January 2023 summarising these adjustments to our estimates; for further information, see our Impact of trade in goods data collection changes on UK trade statistics: adjustments to 2021 EU imports estimates article.

We are continuing to work with HMRC to consider possible options to account for this discontinuity.

Staged Customs Controls

In 2021, the use of Staged Customs Controls (SCC) allowed customs declarations to be reported up to 175 days after the date of import for imports of non-controlled goods from the EU to Great Britain. The UK government introduced full customs controls in January 2022, while July 2022 marked the first full month of data where delayed customs declarations submitted under SCC could not be included. Temporary arrangements still apply for imports of goods from Ireland to Great Britain.

In our Impact of trade in goods data collection changes on UK trade statistics: further update on Staged Customs Controls article, published on 3 July 2023, we presented analysis on the impact of SCC on trade in goods data for imports from the EU to Great Britain in 2022. To account for the impact of SCC, we have now applied an adjustment to our estimates of goods imports from the EU for the period January to June 2022, which has contributed to downward revisions of trade imports for this period.

Revised estimates will also be published in our UK trade: August 2023 bulletin on 12 October 2023. We will be publishing an article on Impact of trade in goods data collection changes on UK trade statistics: adjustments to 2022 EU imports estimates, which will provide a detailed breakdown of the impact of these adjustments.

EU exports in Quarter 1 2022

An operational change implemented by HMRC in January 2022 resulted in a break in the data time series for UK exports to the EU. Although this change does not affect data for March and future months, caution should be taken when interpreting Quarter 1 (Jan to Mar) 2022 data or any periods that include January 2022 data.

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in our Balance of payments QMI.

We will continue to produce our UK balance of payments statistics in line with the UK Statistics Authority's Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards. This is based on the International Monetary Fund's (IMF's) Balance of Payments Manual sixth edition (BPM6) (PDF, 3.0MB), until those standards are updated.