Balance of payments, UK: April to June 2022

A measure of cross-border transactions between the UK and rest of the world. Includes trade, income, capital transfers and foreign assets and liabilities.

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Contact:
Email Jamie Pritchard

Release date:
30 September 2022

Next release:
22 December 2022

1. Main points

  • The underlying UK current account deficit excluding precious metals reduced to £32.5 billion or 5.3 % of gross domestic product (GDP) in Quarter 2 (Apr to June) 2022, a change of £4.4 billion from the previous quarter.

  • The UK current account deficit, when trade in precious metals is included, reduced to £33.8 billion, or 5.5 % of GDP in Quarter 2 2022.

  • In Quarter 2 2022, the total trade deficit, excluding precious metals, reduced to £25.0 billion as the goods deficit expanded to £61.1 billion and services surplus expanded to £36.1 billion.

  • The primary income account recorded a deficit position of £1.9 billion, or 0.3% of GDP in Quarter 2 2022.

  • Net financial flows decreased in Quarter 2 2022 with a net inflow of £10.7 billion.

  • The UK's net international investment liability position narrowed to £167.4 billion from £335.5 billion in the previous quarter.

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Please note that all current account and trade figures exclude non-monetary gold (NMG) and other precious metals unless otherwise stated. This is because movements in NMG, an important component of precious metals, can be large and highly volatile, distorting underlying trends in goods exports and imports.

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2. Current account

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.

Table 1 summarises the latest current account data for Quarter 2 (Apr to June) 2022.

Notes
  1. Current account and trade figures exclude trade in precious metals.

  2. Caution should be taken when interpreting these data as HM Revenue and Customs changed the collection methods for EU trade from January 2022. Our article, Impact of trade in goods data collection changes on UK trade statistics: 2021 to 2022, and further information in our UK Trade bulletin, provide more detail.

The underlying current account narrowed in Quarter 2 2022 to £32.5 billion (5.3% of GDP) from a deficit of £37.0 billion (6.1%) in the previous quarter, excluding precious metals. Direct investment income from abroad was the main contributor to the narrowing in Quarter 2 2022.

Quarter 1 (Jan to Mar) 2022 has been revised lower to a deficit of £37.0 billion (6.1% of GDP), from an initial estimate of £44.2 billion (7.1% of GDP). The revision is primarily because of investment income earnings from abroad (credits) being higher than previously estimated. Revisions to the deficit in Quarter 1 2022 means it now sits below the largest current account deficit on record, which was 7.1% of GDP in Quarter 4 (Oct to Dec) 2015.

When precious metals (including non-monetary gold) are included, the current account deficit in Quarter 1 2022 was the largest recorded at 7.2% of GDP or £43.9 billion, revised down from our previous estimate of 8.3% of GDP or £51.7 billion.

Trade

The total trade balance decreased from a deficit of £25.3 billion, 4.1% of gross domestic product (GDP), in Quarter 1 (Jan to Mar) 2022 to £25.0 billion (4.0% of GDP) in Quarter 2 2022. Trade in goods recorded its highest deficit position of £61.1 billion, or 9.9% of GDP in Quarter 2 2022.

In January 2022, HM Revenue and Customs (HMRC) implemented a data collection change affecting data on imports of goods from the EU to Great Britain (GB). As a result, our EU to GB import statistics from January 2022 are not directly comparable with previous periods.

HMRC has investigated the scale of the transition from the Intrastat survey to customs declarations data to assess whether the change represents a time series break between 2022 and previous years. Our Impact of trade in goods data collection changes on UK trade statistics: 2021 to 2022 article discusses the outcome of these investigations. It concludes that there is a discontinuity of around 6% by value between the two compilation methods.

For EU exports, HMRC has investigated the change in data collection methods comparing the components of trade for 2021 with 2020. The conclusion of these investigations suggests that, when comparing the components that form the trade in goods data in 2020 and 2021, there is a discontinuity of around 5% by value between the two compilation methods. More detail can be found in our UK Trade bulletin.

This quarter we have introduced a methodological improvement to UK trade estimates, following changes to the International Passenger Survey (IPS). For more information on this improvement, please see our Methodological improvements to UK trade and GDP article. This has increased the nominal levels of both imports and exports of travel services back to 2009. In Quarter 1 2022, revisions to travel services contributed £6.9 billion to imports and £5.8 billion to exports.

Figure 3: Rising fuel costs continue to affect the trade in goods deficit in Quarter 2 (Apr to June) 2022

Changes in imports and exports of goods, excluding unspecified goods, £ billion, Quarter 2 (Apr to June) 2022 compared with Quarter 1 (Jan to Mar) 2022

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Notes:
  1. Caution should be taken when interpreting these data as HM Revenue and Customs changed the collection methods for EU trade from January 2022. Our article, Impact of trade in goods data collection changes on UK trade statistics: 2021 to 2022, and further information in our UK Trade bulletin, provide more detail.
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The goods deficit remained at record levels, increasing to £61.1 billion in Quarter 2 2022. High fuel prices continue to affect imports as oil and other fuels imports rose to £29.2 billion in Quarter 2 2022, an increase of £4.4 billion compared with the previous quarter. Record imports of semi-manufactured (£37.8 billion) and finished goods (£71.0 billion) are also contributing to wider deficit when compared with recent quarters. Goods export levels have also increased, to a record £97.9 billion, as semi and finished manufactured goods trade increased by £8.9 billion compared with the previous quarter. Trade in services strengthened its surplus position by £0.5 billion, increasing to £36.1 billion in Quarter 2 2022, as exports increased to £91.7 billion and imports increased to £55.6 billion.

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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 £1.9 billion, or 0.3% of GDP, in Quarter 2 2022. In portfolio investment debits, earnings paid to the rest of the world on debt securities (£17.6 billion) increased in Quarter 2 2022. Changes to interest rates increased earnings from other investment on both credits (£8.2 billion) and debits (£11.4 billion) in Quarter 2 2022.

Secondary income

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

The secondary income deficit was unchanged this quarter at 0.9% of GDP, as the UK continued to make payments to the EU, agreed as part of the financial settlement under the withdrawal agreement. Other payments and receipts captured in the secondary income account have changed because of methodological improvements, which are described in our Detailed assessment of changes to balance of payments annual estimates: 1997 to 2020 article.

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3. Financial account

A current account deficit 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 £10.7 billion in Quarter 2 (Apr to June) 2022. These net inflows are lower than the net borrowing from the rest of the world, implied by the current account including precious metals deficit of £32.5 billion. Net investment in the UK (liabilities) increased by £119.2 billion in Quarter 2 2022. The UK increased its liabilities to the rest of the world as non-residents increased holdings of UK debt securities by £44.7 billion, direct investment positions by £20.0 billion and other investment liabilities increased by £63.0 billion.

Net acquisition of UK assets increased by £108.4 billion in Quarter 2 2022. Direct investment assets abroad increased as £19.6 billion of foreign earnings were reinvested into foreign affiliates, strengthening equity positions. Portfolio investment assets decreased as UK investors continued to sell equity, as assets decreased by £14.9 billion, while deposits of foreign currency and sterling abroad increased in other investment.

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4. International investment position

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 2 (Apr to June) 2022, the IIP recorded a large decrease in the value of its net liability position to £167.4 billion from £335.5 billion in Quarter 1 (Jan to Mar) 2022.

In Quarter 2 2022, the UK asset position increased by £557.1 billion, as foreign currency and deposits abroad increased and saw a positive revaluation effect because of the British pound falling against other currencies over the quarter. UK investors reduced their equity investments abroad and falls in foreign equity markets resulted in a reduction in the end quarter position of £204.0 billion.

The UK liability position increased by £389.1 billion as the value of derivatives and employee stock option liabilities grew by £429.5 billion, offset by large falls in equity and debt security holdings of £231.9 billion as UK markets declined.

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5. Balance of payments data

Balance of payments
Dataset | Released 30 September 2022
Quarterly summary of balance of payments accounts including the current account, capital transfers, transactions, and levels of UK external assets and liabilities.

Balance of payments time series
Dataset | Released 30 September 2022
Quarterly summary of balance of payments accounts including the current account, capital transfers, transactions and levels of UK external assets and liabilities.

Balance of payments – revision triangles
Dataset | Released 30 September 2022
Quarterly summary information on the size and direction of the revisions made to the data covering a five-year period, UK.

UK Economic Accounts: all data
Dataset | Released 30 September 2022
This is released at the same time as the UK balance of payments and provides supplementary tables for the balance of payments. The UK Economic Accounts also provides users with the perspective of the rest of world looking into the UK.

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6. Glossary

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 significant 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.

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7. Measuring the data

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.

Changes to balance of payments estimates

On 13 September 2022, we published our Detailed assessment of changes to balance of payments annual estimates 1997 to 2020. This article provided the indicative estimates of the impact methodological improvements will have on headline balance of payments statistics between 1997 and 2020, consistent with the national accounts. These changes have been incorporated in this release from Quarter 1 1997 onwards. The consistent time series including methodological changes before Quarter 1 1997 will be published in the UK Balance of Payments, The Pink Book 2022 on 31 October 2022.

Changes affecting UK trade statistics

EU imports

In January 2022, HM Revenue and Customs (HMRC) implemented a data collection change affecting data on imports from the EU to Great Britain (GB). As a result, our EU to GB import statistics from January 2022 are not directly comparable with previous months.

HMRC has investigated the scale of the transition from the Intrastat survey to customs declarations data to assess whether the change represents a time series break between 2022 and previous years. Our Impact of trade in goods data collection changes on UK trade statistics: 2021 to 2022 article discusses the outcome of these investigations. It concludes that there is a discontinuity of around 6% by value between the two compilation methods.

We are considering possible options to account for this discontinuity; until then, we continue to advise caution when interpreting monthly trade statistics and will keep users informed of any further changes in data collection.

EU exports

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.

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8. Strengths and limitations

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.

Consultation on ONS release times

The Office for Statistics Regulation has finalised its consultation on release practices. The Office for National Statistics (ONS) has welcomed the findings, as detailed in the ONS response to the Office for Statistics Regulation's proposed change to 9.30am release practice. The ONS specifically noted that the release-time exemptions, which were granted during the coronavirus (COVID-19) pandemic, are now incorporated into the revised Code of Practice. As such, the Balance of Payments will continue to be published at 7am.

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10. Cite this statistical bulletin

Office for National Statistics (ONS), released 30 September 2022, ONS website, statistical bulletin, Balance of payments, UK: April to June 2022

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Contact details for this Statistical bulletin

Jamie Pritchard
bop@ons.gov.uk
Telephone: +44 1633 456106