Balance of payments, UK: January to March 2023

• The underlying UK current account deficit, excluding precious metals, narrowed to £17.0 billion or 2.6% of gross domestic product (GDP) in Quarter 1 (Jan to Mar) 2023, a change of £4.1 billion from the previous quarter when the deficit of £21.1 billion equated to 3.3% of GDP.

• When trade in precious metals is included, the UK current account deficit widened to £10.8 billion, or 1.7% of GDP in Quarter 1 2023.

• In Quarter 1 2023, the total trade deficit, excluding precious metals, narrowed to £19.4 billion from £25.4 billion in the previous quarter; as the goods deficit narrowed and the services surplus decreased.

• The primary income account balance recorded a surplus of £6.6 billion, or 1.0% of GDP.

• In Quarter 1 2023, the UK was a net lender to the rest of the world, recording a net financial outflow of £14.6 billion.

• The UK's net international investment liability position widened from £271.6 billion in Quarter 4 (Oct to Dec) 2022 to £357.8 billion.

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, narrowed to £17.0 billion or 2.6% of gross domestic product (GDP) in Quarter 1 (Jan to Mar) 2023, a change of £4.1 billion from the previous quarter when the deficit of £21.1 billion equated to 3.3% of GDP.

Table 1 summarises the latest current account data for Quarter 1 2023.

Trade

The total trade deficit decreased from £25.4 billion (4.0% of GDP) in Quarter 4 (Oct to Dec) 2022 to £19.4 billion or 3.0% of GDP in Quarter 1 2023. The trade in goods deficit decreased by £8.0 billion to £55.8 billion or 8.6% of GDP. The trade in services surplus reduced by £2.1 billion to £36.4 billion or 5.6% of GDP from the previous period.

Figure 3: Both imports and exports of goods fell in Quarter 1 (Jan to Mar) 2023

Changes in imports and exports of goods, excluding unspecified goods, £ billion Quarter 1 2023 compared with Quarter 4 (Oct to Dec) 2022

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. Our article, Impact of trade in goods data collection changes on UK trade statistics: 2020 to 2022 and further information in our UK Trade bulletin, provide more detail. For more information, please see Changes affecting UK trade statistics in Section 7: Measuring the data.

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The trade in goods deficit decreased to £55.8 billion in Quarter 1 2023. Both imports and exports fell, but imports fell to a greater extent.

Goods imports fell by £11.7 billion because of a decrease in all trade commodities except imports of food, beverages and tobacco, which recorded a small increase of £0.2 billion. The largest falls in imports were recorded in the following commodities:

• finished manufactured goods (£4.6 billion)

• semi-manufactured goods (£3.4 billion)

• other fuels (£2.4 billion)

• oil (£1.1 billion)

Goods export levels decreased by £3.6 billion to £93.0 billion as semi-manufactured goods trade decreased by £1.7 billion, other fuels trade decreased by £1.4 billion and exports of oil decreased by £1.1 billion compared with the previous quarter.

The trade in services surplus narrowed by £2.1 billion to £36.4 billion as imports of other business services increased by £1.7 billion and travel services by £1.0 billion. These were partially offset by the export of travel services increasing by £0.9 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 surplus position of £6.6 billion, or 1.0% of GDP, in Quarter 1 2023.

Within other investment, earnings on both credits (£33.9 billion) and debits (£39.8 billion) continued to increase, driven by interest rate rises despite investors withdrawing deposits and debtors paying down on their loans. These are the largest credits and debits since 2008.

Secondary income

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

The secondary income deficit decreased to 0.6% of GDP (£4.1 billion), as other payments by general government decreased by £1.3 billion.

NOTE - In line with National Accounts revisions policy, Quarter 1 (Jan to Mar) 2023 is not open for any revisions to previous data, therefore we will not be publishing revisions triangles alongside this release. Going forward revisions triangles will be published once a year with the quarterly bulletin aligned with the Pink Book dataset which are fully open to revisions.

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 outflow of £14.6 billion in Quarter 1 (Jan to Mar) 2023, having recorded a net inflow of £13.3 billion in Quarter 4 (Oct to Dec) 2022.

UK resident foreign assets increased by £94.1 billion in Quarter 1 2023. This was mostly because of UK monetary financial institutions (banks) increasing their deposits overseas (mainly foreign currency) and other UK residents increasing their exposure to non-resident long-term debt.

Net incurrence of UK liabilities increased by £79.5 billion in Quarter 1 2023. This was mostly because of non-residents 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.

In Quarter 1 (Jan to Mar) 2023, the IIP recorded a widening in the value of its net liability position to £357.8 billion from £271.6 billion in Quarter 4 (Oct to Dec) 2022.

The UK asset position decreased by £461.6 billion in Quarter 1 2023 and was valued at £13,576.1 billion at the end of the period. While the value of the UK liability position with the rest of the world decreased by £375.4 billion to £13,933.9 billion.

The decrease in both UK assets and UK liabilities was mostly because of a decrease in the stock positions of financial derivatives. In addition, the British pound strengthened against most major currencies. This decreased the British pound valuation of assets denominated in foreign currencies, which were partially offset by the UK liabilities of UK banks foreign currency deposits of non-residents.

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

A more detailed glossary (PDF, 123KB) of terms used in the balance of payments is also available.

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, 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.

Because of technical issues, we were unable to produce some FDI estimates for Quarter 1 (Jan to Mar) 2023 data for this publication. As such, users should be cautious when interpreting Quarter 1 2023 FDI data that are part of balance of payments (BoP) statistics. Updated information for Quarter 1 2023 will be produced, along with revised data for 2022 when we publish BoP Quarter 2 (Apr to June) 2023 in September 2023.

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 (GB). This followed a similar data collection change in January 2021 for data on exports of goods to the EU from GB.

Our article, Impact of trade in goods data collection changes on UK trade statistics: 2020 to 2022 provides more detail on the discontinuity between the two compilation methods.

We have applied adjustments to our estimates of goods imports from the EU for the period January to December 2021 to reflect the data collection change. These adjustments were applied in line with the National Accounts Revisions Policy, into the BoP and GDP quarterly national accounts, UK: July to September 2022 and incorporated in UK trade: November 2022 on 13 January 2023. We published an article, Impact of trade in goods data collection changes on UK trade statistics: adjustments to 2021 EU imports estimates, alongside our UK trade bulletin on 13 January 2023 summarising these adjustments to our estimates.

Consideration will be given to the impact of the data collection changes between 2020 and 2021. We will keep users informed of any updates.

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 GB. 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 GB.

We published an Impact of trade in goods data collection changes on UK trade statistics: update on Staged Customs Controls article on 17 February 2023, summarising the latest analysis on the potential impact of SCC in the first six months of 2022 by comparing Office for National Statistics (ONS) estimates of UK goods imports from the EU with Eurostat estimates of EU goods exports to the UK.

We are continuing to work with HMRC to investigate the impact of SCC and consider any adjustments that may be required. We will provide a further update on our investigations into the impact of SCC on goods imports from the EU on 3 July 2023.

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.

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.