12th September 2026
Britain's latest trade figures provide a useful reminder that the country's economic position is neither as simple nor as gloomy as some headlines suggest.
The Office for National Statistics has reported that the UK's trade deficit in goods and services narrowed in the three months to July 2026. It is still a substantial deficit, but exports grew faster than imports over the period.
That is a small but important improvement at a time when the British economy is dealing with higher energy costs, geopolitical uncertainty, changing trading relationships and weak growth.
The ONS figures show that the total trade deficit, excluding precious metals, fell by £1.1 billion to £9 billion in the three months to July compared with the previous three months. Exports increased by £6.1 billion, or 2.6 per cent, while imports rose by £5 billion, or 2 per cent.
That is not enough to suggest that Britain's long-standing trade problem has suddenly been solved. But it does mean that exports are currently growing faster than imports.
And that matters.
Britain's two very different trade economies
The figures become more interesting when goods and services are separated.
Britain continues to run a very large deficit in physical goods. In the three months to July, the value of goods exports was £102 billion against imports of £163.7 billion, leaving a deficit of £61.6 billion.
Yet the UK is also a major exporter of services.
Services exports were worth an estimated £142.1 billion over the same three months, compared with imports of £89.4 billion. That produced a £52.6 billion services surplus.
The services surplus therefore almost offsets the enormous goods deficit.
It is one of the most important features of the British economy and one that is often lost in arguments about Britain's trade performance.
Britain sells financial, professional, business, legal, insurance, creative, education and other services around the world. The City of London is part of that story, but it is much wider than financial services.
The latest figures suggest that this part of the economy is continuing to perform reasonably well. Services exports rose by an estimated £1.4 billion in the three months to July, compared with a £700 million increase in services imports.
Goods exports are improving too
There is also some encouragement in Britain's manufacturing and goods trade.
In the three months to July, goods exports increased by 4.8 per cent, compared with a 2.7 per cent rise in imports.
Exports to countries outside the European Union rose particularly strongly, increasing by 6.9 per cent, while exports to the EU rose by 2.8 per cent.
That is interesting because Britain has spent much of the period since Brexit trying to adjust to a different trading environment.
It would be premature to claim that the latest figures prove Britain has solved its trading difficulties outside the EU. Trade statistics can move considerably from one period to another and there are many factors involved.
But the figures do show that British exporters are selling more overseas.
China is appearing on both sides of the ledger
There is another intriguing feature in the July figures.
Imports of goods from non-EU countries increased by £1.7 billion in July alone. Much of that increase came from machinery and transport equipment.
The ONS says this included higher aircraft imports from the United States and higher car imports from China.
Indeed, July recorded the highest monthly level of car imports from China.
At the same time, Britain's exports of machinery and transport equipment to non-EU countries increased, partly because of higher car exports to China.
This illustrates the complexity of modern trade.
Britain is not simply exporting to countries that it imports nothing from. Countries can simultaneously be competitors, customers and suppliers.
The EU is still enormously important
Despite all the political arguments surrounding Brexit, the European Union remains Britain's largest trading bloc.
In the three months to July, Britain exported £49.7 billion of goods to the EU and imported £84.8 billion.
The goods deficit with the EU was therefore £35.1 billion.
Trade with non-EU countries produced a smaller goods deficit of £26.5 billion.
But the figures also show that exports to both markets are growing.
That is perhaps the more useful way of looking at the numbers.
The British economy needs access to European markets while also developing successful trading relationships elsewhere. The two objectives do not have to be mutually exclusive.
What does this mean for Scotland?
For Scotland, the figures matter because the country's economy is heavily involved in international trade.
Energy is an obvious example.
North Sea oil and gas have historically played an important role, while Scotland is also becoming increasingly important in renewable electricity, engineering and energy-related technology.
Food and drink is another major export sector, with whisky perhaps the best-known example.
For the Highlands and Islands, international trade can sometimes seem like something that happens somewhere else.
It isn't.
Businesses in Caithness can be part of international supply chains even when they are selling to another British company. Engineering, food production, tourism, professional services and energy-related businesses can all ultimately depend upon international markets.
The challenge is making sure that more of the value generated by these activities remains in the local economy.
That is particularly important as Caithness faces a huge programme of energy investment. Electricity infrastructure, nuclear-related activity, engineering and renewable energy could create substantial economic opportunities.
But infrastructure alone does not guarantee prosperity.
The region needs businesses and workers capable of supplying the new investment.
A deficit is not necessarily a disaster
Britain's trade deficit remains a weakness, particularly because the country imports far more physical goods than it exports.
But a trade deficit should not automatically be interpreted as Britain simply “losing money”.
Britain imports goods because consumers and businesses want them, while the country earns foreign income through exports of services and goods, and through investment income and other international transactions.
The more important question is whether the economy has the productive capacity to generate enough income to pay for what it imports over the long term.
The latest ONS figures offer some encouragement.
The goods deficit remains enormous, but it narrowed slightly. The services surplus increased. Goods exports grew faster than goods imports. And the overall trade deficit fell.
None of this means Britain has suddenly become a trading powerhouse.
But it does suggest that the picture is more complicated than the familiar story of a country that simply imports too much and exports too little.
Britain still has a long way to go.
Yet at a time when the economic news often seems dominated by higher prices, higher borrowing costs and geopolitical uncertainty, a £1.1 billion improvement in the trade balance is at least a small step in the right direction.
Read the full ONS report HERE
There is an interesting intr-active map you can easily click on countries to see individual results.