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NOTES TO TABLE 1
• In current account credits are (+) and debits (-), whilst in the capital / financial account a (+) means an increase in assets or a decrease in liabilities, a (-) means a decrease in assets or an increase in liabilities.
• Item (1) in the current account is the so-called visible trade items of exports and imports of commodities shown on a net basis i.e. receipts less payments.
• Services (2) include receipts and payments arising from charges for the insurance and shipping services associated with the international exchange of goods.
• Remittances on account of interest, profits and dividends (3) arise when, for example, UK firms pay dividends to foreign shareholders (a debit) or vice-versa (a credit).
• Current account transfers (4) are so-called ‘unrequited’ in nature as they do not directly arise form the sale of goods and services or of assets. Examples are payments to and from the EU or foreign aid payments.
• Item (5) then illustrates net overall position for invisibles. As with most of the UK’s post-war trading situation, this has tended to be strongly positive. However, as (6) shows this surplus is consistently outweighed by the deficit in visible trade of goods and services, giving a large overall deficit on the current account.
• In the capital and financial account, capital transfers (7) are difficult in practice to distinguish from current account transfers. Direct investment (8) consists of transactions undertaken to acquire or extend control over a foreign enterprise, whilst portfolio investment (9) consists of transactions aimed at securing investment income or capital gains. Other investment (10) includes trade credits, loans, currency and deposits etc.
• The final set of balances illustrates the net overall position of the balance of payments accounts, whereby item (11) shows the net situation which is a substantial increase in assets.
• The final the overall balance on current, capital and financial accounts (12) is in deficit, but this should of course be in balance, i.e. items (6) and (11) should sum to zero since it is a double-entry accounts system. Hence, the balancing item (13) is calculated as the residual in the www.51lunwen.org/InternationalMonetaryEconomics/ accounts which is required to compensate for the total of measurement errors and omissions. In this case around £10billion.