A deficit opens when spending on imports runs ahead of earnings from exports

The current account records a country's trade in goods and services with the rest of the world, plus smaller flows of income and transfers. When UK households, firms and government spend more on imports than foreign buyers spend on UK exports, more money flows out than comes in on trade, and the current account moves towards deficit.

So every cause of a deficit works through one of two routes: something raises imports, or something cuts exports.

Strong spending at home pulls in more imports

The amount of income in a country directly affects how much it imports: more income brings more imports. When UK incomes rise, people buy more of almost everything, including cars made in Germany and holidays in Spain. Busy firms also buy more imported materials and machinery.

Exports depend on spending in other countries instead. If spending in the UK grows fast while the UK's trading partners grow slowly or fall into recession, imports rise, exports do not keep up, and the deficit widens.