Record trade gap sparks call for new export drive

The turmoil in the eurozone was blamed for a slump in vital export sales while economists cautioned against interpreting a jump in imports as a sign of recovering domestic demand.

The gloomy findings put pressure on markets already spooked by a surge in Italy’s borrowing costs to 7.5 per cent which has pushed the country into bail-out territory. London’s benchmark FTSE 100 index fell almost 2 per cent to close at 5,460.38, while the deepening euro crisis also forced down France’s Cac-40 and Germany’s Dax.

According to official statistics, the difference in value between imports into the UK and exports overseas in September widened to £9.8 billion – the highest since data began in 1998. It compares with an upwardly revised £8.6bn in August and forecasts for a shortfall of about £8bn.

While monthly trade figures tend to be volatile and subject to revision, they are unlikely to alter the view that the economy is struggling for traction.

The Bank of England last month resumed its quantitative easing programme with a fresh £75bn cash injection aimed at shoring up the recovery.

Policymakers were today expected to leave QE unchanged, though most analysts reckon the central bank will increase its asset purchase programme by the start of next year.

The British Chambers of Commerce (BCC) said an improvement in export performance was “critical to Britain’s recovery”.

David Kern, chief economist at the BCC, said: “The government must support a national export drive, and strengthen support for businesses in key areas such as trade finance, insurance and promotion.”

Britain relies on the eurozone for about half of its export trade, and the region’s spiralling debt crisis has hit hard.

Vicky Redwood of Capital Economics said: “We continue to doubt that the UK’s external sector will prevent the economy from sliding back into recession.”