In March 2025, UK trade figures revealed a mixed yet cautiously optimistic outlook. The value of goods imports declined by £0.4 billion (1.7 percent), driven mainly by a 2.5 percent fall in imports from non-EU countries, particularly machinery and fuels. However, EU imports rose slightly, reflecting growing energy imports from key European partners. However, year-over-year trends posted an opposing picture with imports climbing 8.8 percent over the year, showing that imports have improved from a year ago.

Month-over-month goods exports climbed by £0.2 billion (0.8 percent), bolstered by a 1.6 percent increase in exports to the EU, primarily crude oil to the Netherlands. Notably, exports to the United States rose for the fourth consecutive month, contributing a £2.4 billion increase in the first quarter of 2025, despite looming tariffs announced in early April. This suggests pre-emptive trade activity by UK exporters ahead of new trade barriers. Year-over-year, UK exports climbed at a faster rate by 2.1 percent, aided by a robust export performance.

The trade figures take the trade balance to minus £19.86 billion, about £0.46 billion above the consensus forecast. These trends highlight resilience in UK export performance and shifting trade strategies, particularly in anticipation of altered trade dynamics with the US. This update takes the RPI to 22 and the RPI-P to 22, meaning that economic activities continue to stay well ahead of market expectations in the UK.

The deficit is expected to narrow slightly to Stg19.4 billion in March from Stg 20.81 billion in February.

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.