Nor does the story end there. The current account deficit for the third quarter of 2014 – the latest reported – reached 6% of GDP, the highest since records began in 1955. Analysing the figures, the Office of National Statistics observes that one of the principal causes is the deterioration in Britain’s international investment position since 1980. For centuries Britain, courtesy of empire and overseas expansion, enjoyed a phenomenal net surplus of assets; we owned more of the world than foreigners owned us – so that consistently Britain netted a surplus of investment income.
No more. In the third quarter of 2014 the growing net deficit of assets as we sell off the country overseas meant that Britain had a record deficit in its investment income balance of 2.8% of GDP. If these trends continue for another 10 or 15 years the interaction with our growing trading deficit – we import a great deal more than we export – will eventually make the scale of our international debts and income flows abroad insupportable.
The selling of capital stakes is *because* we run a trade deficit. A trade deficit must, as an accounting identity, be matched by a surplus on the capital account.