UK trade account is relatively stable but the current account deficit has exploded in recent years because of a collapse in net property income. The latter has come about as a result of the UK's economic outperformance relative to the rest of Europe which has attracted more FDI. This is not likely to change quickly, hence, the current account deficit is likely to remain very wide, says Societe Generale.
In the short term forecasts, the bank assumes that the net property income component is constant so the bank base the forecast on changes in the trade account.
The trade deficit for Q1 is already known - it widened from an originally reported £5968mn to £7262mn which should push up the current account deficit from £25.3bn to £26.6bn, adds SocGen. The Q4 trade data have subsequently been revised to £6916mn which should lead to a similar revision to the Q4 current accoun.
