The Office for National Statistics said the current account gap the broadest measure of trade with the rest of the world widened to £10.2 billion (€15bn) in the three months to September from £1.36bn in Q2. That was the highest cash deficit on record and equalled 3.4% of GDP, the highest such ratio in five years.
The pound fell more than half a cent against the dollar on the much sharper than expected widening.
"The current account deficit was very disappointing," said Philip Shaw, chief economist at Investec. "What we hadn't factored in was the greater outflow due to overseas earnings in the UK."
The income surplus fell £4bn from Q2's record high as foreign-owned companies in Britain earned higher profits thanks in part to surging oil prices. Foreigners also enjoyed bigger dividend pay-outs on their British shareholdings, as the FTSE-100 share index has been gaining strongly in recent months.
Insurance pay-outs of some £1.9bn arising from from the havoc wreaked by Hurricane Katrina also inflated the deficit, as did maintenance work in the North Sea hitting Britain's usual surplus on oil.
"Hurricane insurance pay-outs will not recur, we expect the deficit to narrow sharply again in Q4 2005," said James Knightley, economist at ING Financial Markets. "The negative impact on sterling from this release should be short-lived."
Separately, the ONS left its estimate for third quarter economic growth untouched from last month. GDP rose by 0.4% on the quarter and by 1.7% on the year, as expected. That still left the British economy on course to record its weakest growth in more than a decade in 2005. Finance Minister Gordon Brown has predicted GDP this year will rise by just 1.75% before picking up next year.
The ONS revised up its estimate for services growth, however, by a tenth of a point to 0.7%. Business investment rose by 0.3% on the quarter.
Bank of England Monetary Policy Committee member Stephen Nickell opposed this month's decision to leave interest rates at 4.5%, preferring a quarter-point cut because he was worried investment would not pick up quickly.