February 2025 showed that total goods imports surged by £2.6 billion (5.2 percent), driven by stronger trade flows with both EU and non-EU partners. In contrast, goods exports fell by 0.1 percent. Notably, trade with the United States stood out: Exports rose by £0.5 billion, the third monthly increase, while imports grew by £0.2 billion, underlining deepening transatlantic trade ties.

The most striking development, however, was the £7.5 billion narrowing of the total trade deficit, bringing it to £1.0 billionthe lowest level since mid-2021. This shift reflects a smaller goods deficit (down to £55.0 billion) and a robust expansion of the services trade surplus, which grew by £4.0 billion to £53.9 billion.

February's figures hint at a more balanced trade environment, bolstered by resilient services exports and improving global relationships, particularly with the US, offering cautious optimism for the UK's external economic position. This latest update takes the RPI to 23 and the RPI-P to 35 in the UK, meaning that economic activities outperform market expectations in the UK economy.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Data are supplied by over 30 sources including several administrative sources, HM Revenue and Customs (HMRC) being the largest.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in the UK. Exports show the demand for UK goods in countries overseas. The pound sterling can be particularly sensitive to changes in the trade deficit run by the United Kingdom, since the trade shortfalls create greater net demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.

The UK's trade balance is particularly susceptible to swings in the oil account and so within the overall goods balance, financial markets will normally focus on the balance excluding oil and other erratic items.