UK trade gap grows to £7.3bn

The UK's goods trade gap with the rest of the world widened to an 11-month high of £7.3 billion in December, official figures showed today.

The UK's goods trade gap with the rest of the world widened to an 11-month high of £7.3bn (€8.2bn) in December, official figures showed today.

The data disappointed City hopes of a narrowing trade gap helped by a weaker pound, as policymakers attempt to rebalance the economy towards exports.

While total exports rose by 4.5% to £20.9bn (€23.7m) on the month, this was outstripped by a 5.2% surge in imports to £28.2bn (€32.1bn), the Office for National Statistics (ONS) said.

"Far from benefiting from the global recovery and lower pound, the UK trade figures got even worse in December," Vicky Redwood, senior economist at Capital Economics said.

Trade has been boosted by worldwide stimulus measures such as 'cash for bangers' car scrappage schemes. The figures showed a 10% rise in car exports but this was surpassed by a near-16% rise in foreign imports during the month.

The UK's goods trade gap with European Union countries was unchanged at £3.7bn (€4.2bn) in December, although it widened by £400m (€454.8m) to £3.6bn (€4.1m) with the rest of the world.

Experts added that the poorer-than-expected trade figures made it less likely that the UK's anaemic 0.1% crawl out of recession in the final three months of 2009 would be raised in later revisions of the figures.

Howard Archer, at IHS Global Insight said: "It does raise questions as to whether or not net trade can make a decent positive contribution to growth going forward and help the economy to rebalance."

For the year as a whole the figures showed the UK's goods deficit with the rest of the world falling by £11.5bn (€13.1bn) to £81.9bn (€93.1bn). Exports were down 9.5% compared with 2008, with imports 10.3% lower.

But David Kern, chief economist at the British Chambers of Commerce (BCC), warned the performance was "not strong enough".

"To strengthen Britain's international trading position, the Government should back our exporters more forcefully - as many of our competitors are doing - and adopt measures aimed at ensuring that adequate trade finance is available," he added.

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