According to data released by the Office for National Statistics earlier today, UK's current account deficit now stands at £32.7bn for the fourth quarter, much higher than the (revised) £20.1bn seen in the previous quarter. That’s the biggest deficit as a share of GDP since records began in 1955, equating to some 7 per cent of GDP, up from 4.3 per cent in the third quarter.
UK's current account balance has been deteriorating since 2011 and the rising current account gap could leave the economy vulnerable in the event of a Brexit vote. The UK was a net borrower of £33bn in the three month period, up from £20.5bn in the previous quarter. The increase was driven by rising imports of goods, and falling goods exports, coupled with falling returns on foreign investments, according to the ONS.
Economists believe that in the event of Brexit, UK economy could face a “sudden stop”-type event, as flows of money into the UK could dry up. In turn, sterling would be likely to plunge, reflecting weaker demand for the currency.
Officials at the Bank of England have described the U.K.'s current account deficit as one of several risks to the stability of the financial system, as well as the broader economy. George Osborne, the Chancellor of the exchequer, said: “Today’s figures expose the real danger of economic uncertainty and shows that now is precisely not the time to put our economic security at risk by leaving the EU.”
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