UK Current Account Deficit Widens as Import Costs Rise and Export Growth Stalls

The United Kingdom’s current account deficit widened materially in the first quarter of 2026, as the combination of higher oil and commodity import costs and a stalling in export growth deteriorated the trade balance at a time when the broader economy was already under external pressure. The deterioration in the external accounts will add to the challenges facing the government and the Bank of England in managing the macroeconomic adjustment following the Iran war shock.

The surge in oil import costs was the most significant driver of the widening deficit. The United Kingdom remains a net oil importer in aggregate, meaning that periods of elevated crude prices systematically increase the value of imports relative to exports, worsening the trade account. The scale of the price increase — with Brent crude rising above $100 per barrel from its recent trading range of around $70-80 — has produced one of the largest single-quarter deteriorations in the oil trade balance in recent years.

On the export side, the picture was complicated by logistics disruption and weakening demand from key trading partners. European growth forecasts have also been cut following the conflict, reducing the appetite of UK exporters’ largest customer base for discretionary goods and services. Services exports — historically a stronger element of UK trade performance — showed more resilience, with financial and professional services maintaining their global competitiveness, but could not fully offset the goods trade deterioration.

The Office for Budget Responsibility flagged the current account deterioration as a risk factor in its most recent fiscal sustainability assessment, noting that a persistently wide deficit requires sustained capital inflows to finance it and that the UK’s dependence on international capital was a long-standing structural characteristic requiring careful management.