LONDON (Reuters) - Britain’s current account deficit, the largest of any major economy last year, was even bigger in 2015 than previously thought, according to new estimates from the Office for National Statistics.
The current account deficit has been in the spotlight since last year’s vote on leaving the European Union, and although it has narrowed recently is not far off levels that would trigger a currency crisis in a less developed economy.
Bank of England Governor Mark Carney said in the run-up to the referendum that Britain was reliant on the “kindness of strangers”, highlighting how the country needed tens of billions of pounds of foreign finance a year to balance its books.
The ONS said on Monday it now estimated the current account deficit was 98 billion pounds in 2015, equivalent to 5.2 percent of gross domestic product, compared with its previous estimate of 80 billion pounds or 4.3 percent of GDP.
Much of the increase stemmed from new methodology that showed British companies paid out more interest to foreign holders of corporate bonds than initially estimated, resulting in a larger current account deficit.
The revisions come more than a year after the government published a review of the ONS by former Bank of England deputy governor Charles Bean, who said many of its statistics were showing their age - especially in capturing the digital economy.
“As the UK has a large and complex financial sector, accurately measuring interest payments is difficult,” said ONS chief economist Nick Vaughan said of Monday’s revisions.
“However, by using better data sources, as part of our plans to transform the way we collect, produce and publish statistics, we are now able to give a much improved estimate of Britain’s financial sector.”
The ONS had already published revised current account data covering the period between 1998 and 2012 in April.
New estimates for 2016 will be published on Sept. 29. The latest figures show the current account deficit for that year stood at 4.4 percent of GDP, while the most recent data for early 2017 showed it had narrowed to 3.4 percent.
Part of the current account deficit reflects stronger investment returns on foreign investments in Britain than on British investments abroad, especially in continental Europe, due to a slow recovery in the euro zone. Sterling’s sharp fall after the June 2016 referendum will also reduce the deficit.
The ONS also revised up its earlier estimates of how much Britons saved. The household savings ratio for 2015 rose to 8.3 percent from 6.1 percent previously, with a similar upward revision for 2014.
The revisions up to 2015 suggest the savings ratio may not be quite as low as shown in the latest data since then.
It hit an all-time low of 1.7 percent in the first three months of 2017 - a level that has sparked unease among economists about prospects for consumer spending, one of the main drivers of Britain’s economy.
The ONS said the revisions reflected changes to the treatment of self-employed people paying themselves dividends from their own companies.
The number of self-employed people hit a record 4.8 million in the three months to June, equivalent to 15 percent of the workforce.
($1 = 0.7771 pounds)
Reporting by Andy Bruce; Editing by Jon Boyle