The UK current account deficit widened to 4.3% of nominal gross domestic product (GDP) in 2019, as both trade and primary income deficits increased, from a deficit of 3.7% of GDP in 2018.
The primary income deficit widened to 1.7% of GDP in 2019 from 1.3% in 2018 as credits (earnings from investment abroad) declined more than debits.
The total trade deficit expanded slightly to 1.4% of GDP in 2019 from 1.2% of GDP in 2018, as the decrease in the trade in services surplus to 4.5% of GDP outweighed a decrease in the deficit on trade in goods to 5.9% of GDP in 2019.
The financial account recorded a net inflow of £107.5 billion in 2019 as UK residents reduced their overseas assets by £165.3 billion while non-residents reduced their UK assets by just £57.8 billion.
The net international investment position (IIP) recorded an increased net liability position of £579.1 billion at the end of 2019 compared with a net liability position of £323.7 billion at the end of 2018 as UK equity markets hit record highs.
The categorical breakdown of the current account is used to better understand the flow of transactions between the UK and the rest of the world. Figure 1 focuses on the following three categories:
trade balance - a measure of net international trade
primary income - a measure of the balance between resident and non-resident income
secondary income - a measure of transfers between residents and non-residents
The UK's current account deficit widened from 3.7% of gross domestic product (GDP) in 2018 to 4.3% in 2019, the largest contributor being the widening in the primary income deficit from 1.3% of GDP to 1.7% over the respective periods. Another contributing factor to the expanding current account deficit was the slight widening to the trade balance, from 1.2% of GDP in 2018 to 1.4% in 2019. The secondary income balance remained consistent with the previous year at a deficit of 1.2% of GDP.
Since 2009, the secondary income balance has remained at a consistent deficit between negative 1.0% and negative 1.4% of GDP, with no annual movements larger than 0.2%. Over the same period, primary income and trade balance movements have been more varied and so tend to play a larger role on current account movements.
The UK continued to record the largest current account deficit of the developed economies in the G7 in 2019, with the United States and then Canada recording the next largest deficits, as shown in Figure 2. Germany, with its manufacture-based economy continued to record a sizeable surplus equivalent to 7.1% of GDP, albeit slightly reduced in 2019 and the lowest since 2013 (6.5% of GDP).
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The total trade deficit (the difference between exports and imports) widened to 1.4% of gross domestic product (GDP) in 2019, from 1.2% in 2018. The widening of the trade deficit was because of a larger contraction of the trade in services surplus than the trade in goods deficit. The trade in services surplus narrowed from 5.2% to 4.5% of GDP in 2019, whilst the goods deficit narrowed from 6.4% to 5.9% of GDP (Figure 3). This is the lowest since 2009 when it was 5.5% of GDP (it was also 5.9% of GDP in 2010 and 2011).
The total trade surplus with non-EU countries widened by £6.1 billion, whilst the total trade deficit with EU countries widened by £11.2 billion. This resulted in the overall total trade deficit expanding by £5.0 billion to £30.5 billion in 2019.
Trade in goods
The trade in goods deficit narrowed by £6.0 billion to £130.9 billion, the first annual improvement to the balance since 2015 (Figure 4). Some of the main contributors to the changing deficit were:
- finished manufactured goods deficit narrowed by £5.2 billion
- coal, gas and electricity deficit narrowed by £4.2 billion
- semi-manufactured goods deficit narrowed by £1.8 billion
The largest offsetting movement was in the oil balance, which switched from a surplus of £0.4 billion to a deficit of £6.6 billion.
The trade in goods deficit with EU countries expanded to £96.7 billion in 2019, from £93.3 billion in 2018. UK exports of goods fell to £170.6 billion, the largest declines recorded in the export of goods to the Netherlands and Belgium. UK imports of goods from EU countries increased slightly to £267.4 billion as increased trading with France, Spain, the Netherlands and other countries outweighed a decrease in imports from Germany.
The contraction of the non-EU trade in goods deficit to £34.2 billion in 2019, compared with £43.5 billion in 2018 is largely because of a £24.3 billion increase in UK trade in goods exports, with the Americas and Asia recording the largest increases in export trade activity over the year.
Trade in goods exports increased by £22.0 billion to £373.1 billion in 2019. Some of the main contributors to the increase were:
- finished manufactured goods exports increased by £13.2 billion to £198.8 billion
- commodities and transactions not classified according to kind increased by £13.0 billion to £15.9 billion
- semi-manufactured goods increased by £2.2 billion to £90.0 billion
The largest offsetting movement was in oil exports, which decreased from £40.8 billion in 2018 to £33.9 billion in 2019.
Trade in goods imports increased by £16.1 billion to £504.0 billion in 2019. Some of the main contributors to the increase were:
- commodities and transactions not classified according to kind increased by £11.4 billion to £17.2 billion
- finished manufactured goods imports increased by £8.0 billion to £261.8 billion
Imports of coal, gas and electricity offset these positive movements, falling by £4.8 billion when compared with 2018, to £8.6 billion.
Explore the 2019 trade in goods data using our interactive tools
Our data break down UK trade in goods with 234 countries by 125 commodities.
Use our map to get a better understanding of what goods the UK traded with a particular country. Select a country by hovering over it or using the drop-down menu.
- Because of a very demanding set of changes in the 2020 national accounts annual update, we have been unable to include the top five imports and exports of goods in the interactive map. Data can be found in the country and commodity datasets published in the UK trade bulletin and we will update within the next UK trade publication on 12 November 2020.
- For more information about our methods and how we compile these statistics, please see Trade in goods, country-by-commodity experimental data: 2011 to 2016. Users should note that the data published alongside this release are official statistics and no longer experimental.
- These data are our best estimate of these bilateral UK trade flows. Users should note that alternative estimates are available, in some cases, through the statistical agencies for bilateral countries or through central databases such as UN Comtrade.
- Interactive maps denote country boundaries in accordance with statistical classifications set out within Appendix 4 of the Balance of Payments (BoP) Vademecum (PDF, 1.1MB).
You can also explore the 2019 trade in goods data by commodity, for example, car exports to the EU and UK tea or coffee imports.
Select a commodity from the drop-down menu or click through the levels to explore the data.
Trade in services
The trade in services surplus narrowed by £11 billion to £100.4 billion in 2019 (Figure 5), the first annual worsening to the balance since 2015 and the lowest surplus since 2016. Some of the main contributors to the narrowing surplus were:
- other business services surplus narrowed by £5.0 billion
- financial services surplus narrowed by £4.7 billion
- telecommunication services surplus narrowed by £4.6 billion
- intellectual property surplus narrowed by £2.7 billion
The main component offsetting the narrowing of the trade in services surplus was a £2.1 billion increase to the transport services balance, switching from a deficit to a surplus for the first time since 2013.
The trade in services surplus with EU countries contracted to £17.5 billion in 2019, compared with £25.3 billion in 2018. The export of services decreased slightly over the year to £123.7 billion while imports of services increased by £6.2 billion to £106.1 billion. Imports of services from France, Luxembourg, Spain and Sweden accounted for much of the increase.
The trade in services surplus with non-EU countries also contracted over 2019 to £82.9 billion, from £86.1 billion in 2018. Services exports with non-EU countries increased by £8.8 billion to £194.0 billion in 2019, with the largest trading increases seen in the United States and across Asian countries. Imports of services from non-EU countries increased by £12.0 billion to £111.1 billion in 2019.
The geographic breakdown for trade in services can be found in the Chapter 9 data tables.
Trade in services exports increased by £7.2 billion to £317.7 billion in 2019 (Figure 6). Some of the main contributors to the increase were:
- other business services increased by £4.5 billion, mainly because of a large movement of services between affiliated enterprises of £5.5 billion
- transport services increased by £3.9 billion, mainly in sea freight
- travel services increased by £3.8 billion
Offsetting decreases in services trade were seen in telecommunication, computer and information services, which decreased by £4.4 billion and financial services, which decreased by £3.1 billion.
Trade in services imports increased by £18.2 billion to £217.3 billion in 2019 (Figure 7). Some of the main contributors to the increase were:
- other business services increased by £9.4 billion, mainly because of a large movement of services between affiliated enterprises of £8.1 billion
- travel service imports increased by £3.2 billion
- transport (£1.8 billion), financial (£1.6 billion) and intellectual property (£1.3 billion) all contributed positively to the increase in services imports
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In 2019, the UK primary income deficit widened by £9.4 billion to £37.3 billion. This is the widest deficit since it peaked in 2016 at a record £48.4 billion.
The widening was because credits decreased by £10.9 billion as UK earnings from foreign direct investment (FDI) decreased by £13.9 billion and portfolio investment abroad decreased by £5.9 billion. Partially offsetting these was an increase in other investment abroad earnings of £8.6 billion.
Debits (foreign earnings on investment in the UK) decreased by just £1.5 billion although there were large offsetting movements. Other investment, and portfolio investment in the UK increased by £12.3 billion and £2.2 billion respectively while earnings on FDI in the UK decreased by £16.1 billion.
FDI has been the only functional category to have consistently run a surplus and provided a positive impact to the primary income balance, as shown in Figure 8.
Two factors can drive changes in earnings:
- level of investment, for example, investing more or less
- rate of return, for example, interest rate movements
We can analyse investment performance from the point of view of rates of return. The rates of return for both investments in the UK and those abroad reduced slightly in 2019, as shown in Figure 9. The rates of return earned on investments in the UK decreased from 2.6% in 2018 to 2.5% in 2019, maintaining a better rate of return than that earned on UK investments abroad, which decreased from 2.4% in 2018 to 2.3% in 2019.
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Focusing on foreign direct investment (FDI), in 2019 the larger fall in the value of FDI debits (foreign earnings) compared with FDI credits (UK earnings), widened the FDI surplus to £23.8 billion, from £21.5 billion in 2018 (an increase of £2.2 billion). This was the largest surplus on FDI income since 2017 when it was £30.3 billion (Figure 10).
The value of FDI credits and debits both decreased in 2019 compared with 2018. The value of FDI credits fell from £102.7 billion to £88.8 billion (a decrease of £13.9 billion) over that period. This was the largest decrease since 2012, when FDI credits fell by £17.4 billion compared with 2011.
The value of FDI debits decreased from £81.2 billion in 2018 to £65.1 billion in 2019 (£16.1 billion lower). This was the largest decrease in the FDI debits data series, which started in 1997 on a consistent basis.
Earnings on FDI are an important component of the current account, influencing the balance of payments. As Figure 10 showed, FDI has positively contributed to the UK current account balance since consistent estimates began. In particular, it shows a positive contribution to the current account balance over the period, which fell considerably from £53.5 billion in 2011 to £1.0 billion in 2016 because of a general increase in FDI debit values alongside falling FDI credit values.
Part of the movement in the FDI surplus has been because of non-residents consistently acquiring UK businesses from 2011 and building their investment in the UK (Figure 11). A larger stock position should, if all else is equal, lead to larger earnings and hence the narrowing of the surplus from 2011 to 2016. The increasing investment into the UK has been to such an extent that the UK has held a net liability position in FDI within the international investment position since 2017.
The surplus on income widened in 2017 and 2018 because of FDI credits increasing significantly in 2017 from 2016. The UK has in most years enjoyed a higher rate of return on its FDI investment overseas than FDI investors into the UK, partly explaining the consistent surplus, as shown in Figure 12.
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The rate of return that investors receive on their investment influences investment flows. Usually, investors will be attracted to investments in countries where the rate of return is high, but that is not the only factor that plays into investors’ decision-making. Other factors such as how safe the investment is seen to be also influences the decision. Figures 13 and 14 show the rate of return for UK investments abroad and foreign investments in the UK, broken down by continent.
UK investors recorded lower rates of return on their foreign investments in 2019. The largest decreases were seen in Africa, and Australasia and Oceania, which have historically been volatile because of their developing economies and proportion of investments in cyclical industries such as mining. More developed economies continue to provide lower but more stable returns decreasing only slightly, possibly pointing towards a slowing in the world economy.
As Figure 9 showed, foreign investors as a whole earned a slightly lower rate of return on their UK investments in 2019. However, investors from the Americas, Australasia and Oceania, and Africa saw an increase in the rate of return on their UK investment in 2019 but not enough to offset the decreases recorded by Europe and Asia.
With the majority of investment flows to and from the UK happening with countries in the EU, it is interesting to look at these countries in more detail and see how the breakdown of EU investments has changed over recent years.
Use the interactive map to see how investment stocks have changed with different countries. Simply hover over the country.
The UK has run a current account deficit in each quarter since Quarter 3 (July to Sept) 1998 or, when considering annual totals, 1983.
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, which can be achieved through either disposing of overseas assets to overseas investors or accruing liabilities with the rest of the world.
In the years prior to the global financial crisis in 2008 to 2009, the UK funded its current account deficit by incurring more liabilities to non-residents rather than selling existing foreign assets. Since the crisis, Figure 15 shows that total net inward and outward flows are much reduced, and that the UK has in most years been reducing its foreign assets.
In 2019, the UK reduced its stock of foreign assets by £165.3 billion (7.5% of gross domestic product (GDP)). This was mostly because of monetary financial institutions reducing their foreign currency deposits overseas and UK businesses drawing on foreign direct investment profits that had not previously been distributed.
Meanwhile, non-residents reduced their UK assets by just £57.8 billion (2.6% of GDP). This was mostly because of UK residents reducing the amount of loans taken out from non-residents.Back to table of contents
The international investment position (IIP) measures the stock of assets and liabilities at the end of period, and is the sum of the opening balance, financial flows and other changes (including price changes, currency changes and so on).
All else remaining the same, the widening in the current account deficit means the UK is more reliant on the rest of the world. This means either incurring net financial liabilities or selling existing assets to finance its borrowing from the rest of the world and therefore the net liability would be expected to widen. However, there can also be revaluation effects and other changes in volume that do not reflect financial flows.
As shown in Figure 16, the net IIP widened in 2019 to £579.1 billion from £323.7 billion in 2018 (equivalent to 26.2% and 15.1% of gross domestic product (GDP) respectively). The widening was because of total liabilities increasing by £316.8 billion to £11,705.0 billion (equivalent to 528.6% GDP) while total assets only increased by £61.3 billion to £11,125.9 billion (equivalent to 502.4% GDP).
From this point forward when we refer to investments, we use the three main types of investments (direct, portfolio and other) excluding financial derivatives and employee stock options, and reserve assets. This is because it is possible to estimate the impact of both currency and price changes on the three main types of investments.
In most years the financial flows are one of the main factors driving the change in the UK's assets and liabilities. The variations in stock not only reflect the accumulation of new assets and liabilities but also the disposal or revaluation of existing ones and changes in the sterling exchange rate. Changes in exchange rates affect the sterling value of UK assets abroad as they are mainly denominated in foreign currencies. Another factor that could impact upon the revaluation of these assets and liabilities are equity price movements, which can impact on the value not the underlying volume.
By the end of 2019, the value of UK direct investment, portfolio investment and other investment overseas decreased by £61.6 billion (Figure 17). This was because UK investors disposed of foreign investments to the value of £173.3 billion and the British pound strengthened 5.3% from the end of 2018 against a basket of currencies, leading to currency revaluations reducing foreign-denominated assets by £342.5 billion. Partially offsetting these decreases were positive impacts from price revaluations and other changes in volume of £354.2 billion and £100.0 billion respectively.
The value of UK liabilities to foreign investors increased by the end of 2019 by £183.1 billion (Figure 18). UK liabilities in direct investment, portfolio investment and other investment increased despite foreign investors disinvesting £57.8 billion. Similar to UK foreign assets, UK liabilities also experienced a negative currency revaluation of £210.4 billion as a substantial amount of foreign currency is deposited with UK monetary financial institutions. Driving the increase in liabilities was a positive price revaluation of £320.3 billion as the UK equity market recovered strongly from a sharp dip at the end of 2018 and other positive changes in volume of £131.1 billion.
To obtain the exchange rate impact, we have calculated currency changes by calculating sterling exchange rate movements against a basket of currencies. Similarly, price movements are modelled using a combination of stocks and bond indices including end-quarter share princes for the Dow Jones, Euro Stoxx, FT-SE and Nikkei exchanges (for more information see article on the UK's international investment position, 2016).Back to table of contents
Balance of payments, The Pink Book
Dataset | Released 30 October 2020
Annual summary of balance of payments accounts including the current account, capital transfers, transactions, and levels of UK external assets and liabilities.
Balance of payments, The Pink Book time series
Dataset | Released 30 October 2020
Annual summary of balance of payments accounts including the current account, capital transfers, transactions and levels of UK external assets and liabilities.
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, the capital account, and the financial account.
The current account is made up of the trade in goods and services account, the primary income account, and 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.
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.
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.
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.Back to table of contents
More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Balance of payments QMI.
After EU withdrawal
As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.
After the transition period, 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.
Data revision policy
In accordance with National Accounts Revisions Policy, data in this release have been revised back to 1997.
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 (Office for National Statistics (ONS))
- International Passenger Survey (ONS) - this was suspended from 16 March 2020
- 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. The International Trade in Services Survey (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 for all monetary financial institutions - such as banks - and other sources for property and public corporations in FDI. 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. It measures the direct investments of UK-resident companies - both UK parent companies and foreign-owned UK affiliates - with the rest of the world relative to the direct investments of non-UK resident companies held in the UK.Back to table of contents
Contact details for this Statistical bulletin
Telephone: +44 (0)1633 456106