I had understood that whereas the UK has for many years had a very large trade defect in goods, this was made up for by the excellence in the UK services export sector. Indeed league tables generally put the UK as second only to the US in terms of services exports.The 2015 World Atlas for example puts the US services exports first at $690.1bn, the UK second at $344.4bn and IE eight at $127.7bn.
I have quoted the Irish figure because I have been a keen observer of the Irish Economy for years and there is a consistent anomaly: both countries think they have a considerable services export surplus with each other! This of course is not possible but, whereas goods are very easy to track, services are a lot more difficult to measure, sampling and statistical errors can occur and there is no defined methodology.
This was interesting but, perhaps, not of major importance. I learned recently however that it was a much wider problem as reported in the Financial Times. The 2014 figures for example are displayed in Fig. 1 and show, in each and every case, for the top 10 services trading partners the UK maybe considerably overestimating its services surplus with its partner, with dramatic differences especially for the US, Netherlands and Ireland – swinging from an impressive surplus to a substantial deficit.
As stated by Chris Giles in the FT article:
For the 10 countries with the largest discrepancies, British data held at the UN recorded a combined services trade surplus of $77bn in 2014, the most recent year of comparable statistics, while data from the other countries showed Britain has a services trade deficit of $39bn.
What is worrying from the measurement point of view that there is a pattern emerging. The fact that with every single one of the top services trading countries the UK thinks it has a greater trade surplus than the partner country is indicative of a systematic rather than a random error.
This could well have serious consequences for HMG policy. The Chequers option so favoured by PM May for example will align its goods policy very close to the EU but leave the UK free to trade in services as it wishes. The likelihood of course of the Chequers plan surviving in its current form is of course zero. This is not the point. If the UK really has a trade deficit rather than a substantive trade surplus in services, possibly the entire thrust of HMG policy, based on putting all ones eggs in the services basket, is a false premise?