Balance of payments, UK: October to December 2023

• The underlying UK current account deficit excluding precious metals expanded to £26.3 billion, or 3.9% of gross domestic product (GDP), in Quarter 4 (Oct to Dec) 2023, a widening of £5.9 billion from Quarter 3 (July to Sept) 2023.

• The UK current account deficit when trade in precious metals is included, increased to £21.2 billion, or 3.1 % of GDP.

• The total trade deficit excluding precious metals expanded by £3.9 billion to £12.5 billion (1.8% of GDP) as the goods deficit widened to £49.0 billion and services surplus narrowed to £36.5 billion in Quarter 4 2023.

• The primary income account deficit widened to £8.5 billion, or 1.3% of GDP, in Quarter 4 2023 as debits increased more than credits.

• The UK recorded a net financial inflow of £8.8 billion in Quarter 4 2023, down from a £26.8 billion inflow in the previous quarter as portfolio investment moved to a net outflow.

• The preliminary estimate of the UK's net international investment liability position at 31 December 2023 was £825.0 billion.

The UK’s current account balance is a measure of the country’s balance of payments (BoP) with the rest of the world in trade, primary income and secondary income.

The underlying UK current account deficit excluding precious metals expanded to £26.3 billion, or 3.9% of gross domestic product (GDP), in Quarter 4 (Oct to Dec) 2023, a widening of £5.9 billion from Quarter 3 (July to Sept) 2023.

Table 1 summarises the latest current account data for Quarter 4 2023.

Trade

The total trade deficit for goods and services increased from £8.7 billion (1.3% of GDP) in Quarter 3 (July to September) to £12.5 billion (1.8% of GDP) in Quarter 4 2023.

The trade in goods deficit increased by £1.9 billion from the previous quarter to £49.0 billion, or 7.2% of GDP, and the trade in services surplus decreased by £1.9 billion to £36.5 billion, or 5.4% of GDP.

The trade in goods deficit increased by £1.9 billion to £49.0 billion in Quarter 4 2023 as the value of exports fell by £1.0 billion whereas the value of imports increased by £0.9 billion.

The trade in services surplus decreased by £1.9 billion to £36.5 billion in Quarter 4 2023, led by an increase of £1.7 billion in the imports of services. The largest increases recorded were imports of insurance and pension services (£1.0 billion) and travel services (£0.8 billion). Exports of services decreased £0.3 billion in Quarter 4 2023.

Primary income

The primary income account records income the UK receives and pays on financial and other assets, along with compensation of employees.

The primary income account deficit increased to £8.5 billion, or 1.3% of GDP, in Quarter 4 2023 as UK payments (debits) increased by £2.7 billion to £107.2 billion and UK earnings (credits) increased by £1.1 billion to £98.7 billion.

Earnings on other investment continued to be influenced by increased interest rates, with earnings on both credits (£44.5 billion) and debits (£51.8 billion) the highest since 2008.

Secondary income

The secondary income account shows current transfers between residents and non-residents.

The secondary income deficit increased from £4.9 billion in Quarter 3 2023 to £5.3 billion (0.8% of GDP) in Quarter 4 2023.

A current account deficit, which the UK has experienced each year since 1984, places the UK as a net borrower with the rest of the world, indicating that overall expenditure in the UK exceeds national income. The UK must attract net financial inflows to finance its current (and capital) account deficit. This can be achieved through either disposing of overseas assets to overseas investors or accruing liabilities with the rest of the world.

The financial account recorded a net inflow of £8.8 billion in Quarter 4 (Oct to Dec) 2023, after recording a net inflow of £26.8 billion in Quarter 3 (July to Sept) 2023.

Net acquisition of UK assets represented a financial outflow of £39.4 billion in Quarter 4 2023. Compared with Quarter 3 2023, there was increased portfolio investment in equity securities abroad by UK monetary financial institutions (banks), and reduced net other investment abroad.

Net incurrence of UK liabilities was an inflow of £48.2 billion in Quarter 4 2023. Foreign monetary financial institutions (banks) increased their deposits in the UK (mainly foreign currency) and other foreign residents invested in British government gilts.

Further details are available in our Quarterly economic commentary.

The international investment position (IIP) represents the UK's balance sheet with the rest of the world, measuring the difference between the net stock of assets and liabilities at a point in time which we report as the last day of each quarter.

The preliminary estimate of the IIP net liability position was £825.0 billion at the end of Quarter 4 (31 December) 2023. Users should be aware that the preliminary IIP estimates of Quarter 3 (30 September) 2023 and Q4 2023 are subject to more uncertainty than normal as the ONS Foreign direct investment survey data element has been carried forward from Quarter 2 (30 June) 2023 into Quarter 3 and Quarter 4 as explained in Section 7 Measuring the data.

The UK asset position in the three months to 31 December 2023 was valued at £13,529.7 billion. The value of the UK liability position with the rest of the world was valued at £14,354.7 billion. Both assets and liabilities recorded positive revaluation impacts as global equity and bond markets rose.

Balance of payments

The balance of payments is a statistical statement that summarises transactions between residents and non-residents during a period. It consists of the current account, capital account and financial account.

Current account

The current account is made up of the trade in goods and services account, the primary income account and the secondary income account. The difference in the monetary value of these accounts is known as the current account balance. A current account balance is in surplus if overall credits exceed debits, and it is in deficit if overall debits exceed credits.

Capital account

The capital account has two components: capital transfers and the acquisition (purchase) or disposal (sale) of non-produced, non-financial assets.

Capital transfers are those involving transfers of ownership of fixed assets, transfers of funds associated with the acquisition or disposal of fixed assets, and cancellation of liabilities by creditors without any counterparts being received in return. The sale or purchase of non-produced, non-financial assets covers intangibles such as patents, copyrights, franchises, leases and other transferable contracts, and goodwill.

Financial account

The financial account covers transactions that result in a change of ownership of financial assets and liabilities between UK residents and non-residents. For example, the acquisitions and disposals of foreign shares by UK residents. The accounts are presented by the functional categories of direct investment, portfolio investment, other investment, financial derivatives and reserve assets.

International investment position

The international investment position (IIP) is a statement that shows at the end of the period the value and composition of UK external assets (foreign assets owned by UK residents) and identified UK external liabilities (UK assets owned by foreign residents). The framework of international accounts sets out that the IIP is also presented by functional category, consistent with primary income and the financial account.

Precious metals

In line with international standards, the Office for National Statistics' (ONS's) headline trade statistics contain the UK's exports and imports of non-monetary gold. This trade can have a large effect on the size of and change in the UK's headline trade figures. This is because a substantial amount of the world's trade in non-monetary gold takes place on the London markets.

Further information on precious metals and their impact can be found in our UK trade bulletin.

Special drawing rights

Some International Monetary Fund (IMF) member countries have access to international reserve assets called special drawing rights (SDRs). A general allocation of SDRs, equivalent to approximately US $650 billion, became effective on 23 August 2021 and was allocated to participant countries in proportion to their existing quotas. The UK's SDR allocation was equivalent to $19,318 million and was received in August 2021.

Net errors and omissions

Although the balance of payments accounts are, in principle, balanced, imbalances between the current, capital and financial accounts arise from imperfections in source data and compilation in practice. This imbalance, a usual feature of balance of payments data, is labelled "net errors and omissions."

For more detailed definitions of terms used in the balance of payments, see our glossary (PDF, 123KB).

Data sources

Balance of payments statistics are compiled from a variety of sources, produced in the national accounts sector and financial accounts (SFA) framework. Some of the main sources used in the compilation include:

• overseas trade statistics (HM Revenue and Customs (HMRC)

• International Trade in Services Survey (ITIS) (Office for National Statistics (ONS)

• International Passenger Survey (ONS); this was suspended between March 2020 and January 2021 because of coronavirus (COVID-19)

• Foreign Direct Investment Survey (ONS and Bank of England (BoE)

• various financial inquiries (ONS and BoE)

• Ownership of UK Quoted Shares Survey (ONS)

Trade is measured through both exports and imports of goods and services. Data are supplied by over 30 sources, including several administrative sources, with HMRC being the largest for trade in goods. ITIS, conducted by the ONS, is the largest single data source for trade in services.

The main source of information for UK foreign direct investment (FDI) statistics is the ONS FDI Survey; separate surveys are used to collect data on inward and outward FDI. This is combined with data from the BoE on the banking sector. The statistics in this bulletin are compiled using the asset and liability measurement principle, which uses residency as the main distinction between outward and inward investments.

Because of recent technical challenges in processing data from the ONS FDI survey, we have temporarily paused processing of these data. This pause will allow us to address the underlying challenges and safeguard timely and quality data going forward. As a result of the pause, Foreign Direct Investment-related estimates for Quarters 3 (July to Sept) and 4 (Oct to Dec) 2023 are subject to more uncertainty than usual, with the elements that are drawn from the ONS FDI survey being based on Quarter 2 (Apr to June) 2023 data. As a result, users should be cautious when interpreting recent FDI data in the balance of payments (BoP) statistics; users should also note that we have not yet included annual benchmark data for 2022 estimates. We expect to resume processing of the FDI survey data later in 2024.    

Changes affecting UK trade statistics

Since the UK left the EU on 31 January 2020, the arrangements for how the UK trades with the EU changed.

HM Revenue and Customs (HMRC) implemented some data collection changes following Brexit, which affected statistics on UK trade in goods with the EU. We have made adjustments to our estimates of goods imports from the EU in 2021 and 2022 to account for these changes, however a structural break remains in the full time series for goods imports from and exports to the EU from January 2021.

We therefore advise caution when interpreting and drawing conclusions from these statistics. Our article, Impact of trade in goods data collection changes on UK trade statistics: summary of adjustments and the structural break from 2021 provides more detail.

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in our Balance of payments QMI.

We will continue to produce our UK balance of payments statistics in line with the UK Statistics Authority's Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards. This is based on the International Monetary Fund's (IMF's) Balance of Payments Manual sixth edition (BPM6) (PDF, 3.0MB), until those standards are updated.