Maybe we can’t devalue our way out of trouble after all.

That was one of the fears sending the value of the pound down again this morning, when the January trade figures showed a surprise widening in the UK trade deficit from £2.6bn to £3.8bn, the highest since August 2008.

The figures showed that lower exports – not higher imports – were responsible for most of the change. Excluding erratic items like oil, the volume of good exports fell by 6% during the month. Imports, on the same measure, actually fell by 1.2%.

Yes, these are only one month’s figures, which may have been distorted by the bad weather. But this is not the first time that the trade figures have disappointed. Whether it’s the GDP data or the trade figures, you’d be hard-pressed to find any evidence of export-led growth. Quite the reverse.

According to those recent GDP figures, net trade actually subtracted from growth throughout the second half of 2009. This, despite the fact that the pound has lost more than 25% of its value, in trade-weighted terms, since mid-2007.

What’s supposed to happen when a country’s currency depreciates is that its exports become cheaper, in terms of foreign currency, and imports become more expensive. In other words, its terms of trade deteriorate: you can buy fewer imports for one unit of exports.

Though Harold Wilson famously tried to claim otherwise, that means that “the pound in our pocket” is worth less in the global marketplace than before.

But, other things equal, it should also mean that UK-manufactured goods do better against their competitors – both abroad and in their home market. As a result, we should be buying more UK-made products because they’re cheaper. And so should foreigners.

Except, as I’ve mentioned before, that is not what we’ve seen. What we’ve seen is exports and imports falling – along with the wider economy – but exports more than imports. And there has been almost no change in our terms of trade.

In other words, UK manufacturers seem to have taken the opportunity to increase their margins – here and abroad – rather than pick up new sales.

Melissa Kidd, at Lombard Street Research has alerted me to a recent article on this subject from the Bank of England. As that note points out, there are lots of reasons why Britain’s terms of trade [439KB PDF] might not have responded to the fall in sterling.

Over time, the higher margins could still attract more companies into the export sector and thus encourage more rebalancing of the economy, along with lower export prices.

That is more or less what happened after we left the ERM in 1992. As the same chart shows, the terms of trade didn’t fall very much then either, but we did – belatedly – enjoy a brief period of more balanced growth.

There is no doubt that the sharpest fall in the value of sterling since the war happened at a bad time for exporters to make the most of it. As the pound was falling, so were our export markets – right off a cliff.

Under the circumstances, it’s perhaps not surprising that our exporters tried to extract every last penny out of the demand that was still there.

By supporting cashflow, this response to the lower pound may even have contributed to the smaller number of insolvencies in this recession, relative to the decline in output.

On this optimistic view, a pick-up in export volumes is only a matter of time. As the world recovers, so will exports. (True, we don’t export much to the markets that are actually growing at the moment – like China. But remember this is supposed to be the optimistic view.)

Exporters have been making positive noises in recent company surveys by both the CBI and the PMI. Here, as elsewhere, the hard numbers may be a few steps behind reality.

However, the pessimists would say that, in a global economy, 25% depreciations don’t buy as much growth as they used to.

With global supply chains now so much more integrated across borders, even self-described “exporters” will rely a lot on imported components as well as raw commodities.

That means the net benefit from even a significant depreciation is almost certainly lower than it used to be, even if it’s unlikely to be zero.

Indeed, it could be that in this globalised world. The big gainers from depreciation are not UK exporters, or workers in UK factories, but UK shareholders in UK-listed companies who operate around the world and can now expect the sterling profitability of those operations to go up.

Supposedly, that kind of optimism about future earnings has helped drive the recent rise in the FTSE. Though today, even that recent rally seems to have petered out.

Oh yes, and there was a disappointing housing-market survey, and some words of warning about the deficit from Fitch, the leading ratings agency. All in all, not a good day for UK plc.

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