In May 2025, the UK's trade performance offered cautious optimism as the goods trade deficit narrowed to £21.69 billion, improving from an upwardly revised fall of £22.42 billion in the previous month. This positive shift was underpinned by a 2.2 percent (£0.6 billion) rise in goods exports, reflecting growing momentum in trade with both EU and non-EU partners.

Notably, exports to the United States, including precious metals, rebounded by £0.3 billion after a sharp dip in April, though overall levels remained modest, highlighting some recovery, but also lingering fragility in transatlantic trade.

While the total value of goods imports dipped slightly by 0.2 percent, a simultaneous increase in imports from both EU and non-EU countries hints at shifting sourcing patterns or pricing effects rather than a broad decline in demand.

The narrowing trade deficit is driven by export growth rather than a contraction in import appetite, an encouraging sign for UK exporters. However, with export volumes to key markets still recovering from earlier setbacks, the outlook remains sensitive to global demand conditions and currency movements. This latest update takes the RPI to minus 7 and the RPI-P to 1. This means that economic activities are now within the expectations of 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.