The following is the unedited transcript of the news release from the UK National Statistics.


The current account recorded a deficit of £8.5 billion in the fourth quarter of 2007, equating to -2.4 per cent of GDP. This compares with a revised deficit of £19.1 billion (-5.5 per cent of GDP) in the third quarter. A deficit of £13.6 billion was recorded with the EU compared with a deficit of £10.7 billion in the previous quarter.

Compared with the third quarter, the current account showed a switch from a deficit on income to a surplus on income, together with a higher surplus on trade in services, partially offset by an increase in the deficit on current transfers. The surplus on income stood at £9.2 billion and the surplus on trade in services widened to £10.1 billion. The deficit in current transfers increased to £4.6 billion. The deficit on trade in goods was little changed at £23.2 billion. The current account for the year 2007 was in deficit by £57.8 billion (-4.2 per cent of GDP), compared with a revised deficit of £50.7 billion in 2006 (-3.9 per cent of GDP). Global totals in this release have been revised from the first quarter of 2006. The geographical estimates have been revised from the first quarter of 2005.

Current account balance as percentage of GDP

The current account balance equates to -2.4 per cent of GDP at current market prices in the fourth quarter, compared with -5.5 per cent in the previous quarter. The deficit on trade in goods and services is equivalent to -3.7 per cent of GDP in the latest quarter, compared with -3.9 per cent in the previous quarter, whilst the surplus on income is 2.6 per cent of GDP in the latest quarter, compared with -0.7 per cent in the third quarter. The current account balance for the year 2007 equates to -4.2 per cent of GDP, compared to -3.9 per cent in 2006. The deficit on trade in goods and services for the latest year is equivalent to -3.6 per cent of GDP, the same percentage as in 2006.

Current account with EU and non-EU countries

A deficit of £13.6 billion was recorded with the EU in the fourth quarter, compared with a deficit of £10.7 billion in the previous quarter. This increase was driven by a switch from a surplus on income to a deficit on income together with an increase in the deficit on current transfers, which outweighed an increase in the surplus on trade in services. The deficit on trade in goods also increased slightly in the latest quarter. A surplus of £5.2 billion was recorded with non-EU countries compared with a deficit of £8.4 billion in the previous quarter. This was driven by a switch from a deficit on income of £2.8 billion in the third quarter to a surplus on income of £10.8 billion in the latest quarter. There was an increase in the surplus on trade in services in the fourth quarter and increases in the deficits on current transfers and on trade in goods.

A deficit of £46.6 billion was recorded with the EU in the 2007, compared with a deficit of £39.0 billion in 2006. There was a deficit of £11.2 billion with non-EU countries in the latest year, a decrease of £0.5 billion on the previous year.

Trade in Goods

The deficit on trade in goods in the fourth quarter was £23.2 billion, the same as in the previous quarter. Exports and imports both rose by £1.4 billion. The deficit on trade in oil was virtually unchanged at £1.3 billion; exports and imports both rose by £1.0 billion. The deficit for fuels other than oil widened by £0.5 billion, due to increased imports outweighing increased exports. The deficit for semi-manufactured goods narrowed by £0.2 billion to £1.7 billion, with a fall in exports being outweighed by a larger fall in imports, whilst the deficit for finished manufactured goods narrowed by £0.4 billion to £13.8 billion, due an increase in exports.

The deficit on trade in goods was £87.6 billion in 2007, a rise of £10.1 billion compared with 2006. The deficit on trade in oil was £3.3 billion in the latest year, virtually unchanged from the deficit of £3.4 billion in 2006: there was little change in the price of crude oil and a fall in the volume of imports but this was balanced by higher imports of oil other than crude oil. Amongst other commodities, the deficits for finished manufactures, semimanufactures, basic materials and food, beverages and tobacco all widened significantly in 2007.

Trade in Services

The trade in services surplus was £10.1 billion in the fourth quarter, an increase of £0.5 billion compared with the previous quarter. Exports rose by £0.5 billion to £35.3 billion, mainly reflecting increases in exports of financial and travel services.Imports fell by £0.1 billion to £25.1 billion, with falls in imports of other business services being largely offset by rises in imports of government services. The surplus for trade in services was £38.5 billion in 2007, a rise of £7.4 billion compared with 2006. Exports of services rose by £11.3 billion between 2006 and 2007; imports increased by £3.8 billion during the same period. The increase in exports was mainly driven by financial services with smaller increases in, travel, insurance and other business services. The rises in imports were mainly in travel and other business services.

Income

There was a surplus on income of £9.2 billion in the fourth quarter, following a deficit of £2.4 billion in the previous quarter. Income credits were £74.6 billion in the fourth quarter, £3.0 billion higher than in the previous quarter. This increase was mainly due to rises in earnings on direct investment abroad and on other investment abroad. Income debits fell by £8.7 billion in the latest quarter, to £65.3 billion, driven by a fall in foreign earnings on direct investment in the UK. The deficit on compensation of employees was £0.2 billion in the fourth quarter, unchanged from the previous quarter. The surplus on direct investment income was £18.0 billion in the fourth quarter, up on the £6.5 billion surplus in the previous quarter.

Earnings on direct investment abroad were £22.2 billion in the latest period, up £1.4 billion on the third quarter. Increased earnings on UK direct investment abroad were driven mainly by increased earnings in the non-financial sector. Lower earnings reported by the monetary financial sector were more than offset by increased earnings in all other sectors. Earnings on direct investment in the UK fell sharply in the latest quarter to £4.1 billion, compared with earnings of £14.2 billion in the third quarter. Lower earnings were reported by all sectors, with foreign owned banks reporting significant losses in the latest quarter. These losses stem from the reassessment of the value of derivative positions in light of the recent market turmoil. Portfolio investment income recorded a deficit of £0.3 billion in the fourth quarter, down from a deficit of £0.6 billion in the previous quarter. UK earnings on holdings of foreign securities rose by £0.5 billion in the fourth quarter, to £16.6 billion, the highest on record, with higher earnings on both equity and debt securities. Foreign earnings on portfolio investment in the UK increased by £0.2 billion in the latest quarter, to £16.9 billion, also the highest on record, with an increase in earnings on debt securities outweighing a fall in earnings on equity securities.

The deficit on earnings from other investment increased by £0.2 billion to £8.5 billion in the latest period, the highest on record. Earnings on other investment abroad were £35.4 billion, an increase of £1.0 billion from the previous quarter, due to higher banks'' earnings on loans to and deposits with nonresidents, in both foreign currency and Sterling. Earnings on other investment in the UK increased by £1.2 billion, to £43.9 billion, due to increased interest payments on both Sterling and foreign currency bank deposit liabilities. The increase to both
credits and debits reflect recent investment and the depreciation in the value of Sterling in the fourth quarter.

Income on reserve assets was £0.2 billion in the fourth quarter, little changed from the income earned in the third quarter.The surplus on income in 2007 fell to £5.3 billion from £7.8 billion in 2006, mostly due to an increase in the deficit on other investment which outweighed an increase in the surplus on direct investment. There was a direct investment surplus of £37.5 billion in 2007, £5.2 billion higher than in the previous year. Earnings on direct investment abroad increased to £86.7 billion in 2007 from £84.3 billion in 2006. The increased earnings abroad mainly reflects the increased profitability of private non-financial corporations, insurance companies and other financial intermediaries.

Earnings on direct investment in the UK in 2007 were £49.2 billion, down from £52.0 billion in 2006. Total equity earnings decreased to £42.5 billion, compared with £46.1 billion in 2006. Reinvested earnings increased by £7.6 billion over the year to £30.5 billion, but this was more than offset by losses on distributed branch profits, which went from profits of £6.4 billion in 2006 to losses of £5.8 billion in 2007. Foreign owned banks were the main contributor to the lower earnings on investment in 2007.