Balance of Payments
Quarter 3 2005: UK deficit widens
Current account balance as a % of GDP
The current account deficit widened to £10.2 billion in the third quarter, from a revised deficit of £1.4 billion in the second quarter. This is equivalent to -3.4 per cent of GDP, the largest deficit as a percentage of GDP since the fourth quarter of 2000.
The deficit on goods and services widened to £14.1 billion, due in part to £1.9 billion claims on the UK insurance industry arising from Hurricane Katrina. In addition, the income balance fell from an £11.0 billion surplus in the second quarter to a surplus of £6.9 billion in the third quarter, mainly due to higher foreign earnings on direct investment in the UK.
The major transaction within the financial account is related to the restructuring of a major oil company (Shell) in the third quarter, which affected both direct and portfolio investment flows.
Data have been revised from 2003, primarily to incorporate annual Foreign Direct Investment (FDI) survey results for 2003 and 2004, together with trade in services and insurance, and pension fund survey results for 2004.
These new data have limited impact on the current account balance, but have changed the geographical allocation of income flows significantly. The estimate of the current account deficit in quarter two has been revised from £3.1 billion to £1.4 billion, mainly due to later direct investment inquiry data.
Balance of payments data are presented in current price terms.
The current account covers transactions in goods, services, income and current transfers. The financial account covers transactions in financial assets and liabilities (such as direct investment, investment in shares, debt securities and loans and deposits.
The international investment position (IIP) measures the level of the UK's inward and outward investment with the rest of the world.
Unless otherwise specified, current account figures are seasonally adjusted, while financial account and international investment position are not seasonally adjusted.
Publication of the annual balance of payments Pink Book sees the release of the detailed geographical breakdown of the UK's annual current account and international investment position dataset. Data for 66 individual countries and 19 country groupings and international organisations are published as part of this dataset.