Holidaymakers opting for domestic ‘staycations’ helped to halve the UK's trade deficit between 2007 and 2011 as a weak pound caused imports of travel services to slump.
Imports of travel services, which represent overseas tourism by UK residents, fell significantly in the past few years as Britons chose to take holidays at home over trips abroad, according to a Bank of England analysis published today.
The report in the bank’s quarterly bulletin said the UK's net trade deficit with the rest of the world narrowed to 1.6% of gross domestic product by the third quarter of 2011 from 3% in the second quarter of 2007.
It said UK goods exports were helped by 25% depreciation of sterling between 2007 and 2009, which arrested a slide in the country's share of goods trade with its major trading partners.
The improvement in the UK's share of goods export markets appears to be almost entirely down to greater trade with countries outside the European Union, the report said.
But progress on trade has been derailed by a sovereign debt crisis in the eurozone, which has sapped business confidence and hurt demand for UK goods and services from its single biggest trading partner.
"Looking ahead, both the level of sterling and developments in the rest of the world are likely to be crucial to the United Kingdom's trade performance," the Bank of England report said.
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