Trade deficit rise raises fears for UK recovery

Exports fell 1.5 per cent to £25.7 billion in November, driven by a £300 million fall in silver sales to countries outside the EU, according to the latest figures from the Office for National Statistics (ONS). Imports rose 1.1 per cent to £34.4bn as the UK made record purchases of chemicals, particularly medical products, and crude oil.

The widening of the trade gap was larger than economists had expected, while the ONS also revised October’s shortfall up to show a smaller improvement than previously reported.

Howard Archer, chief UK and European economist at IHS Global Insight, said net trade still looks likely to have made a positive contribution to GDP in the fourth quarter of 2011, in contrast with the third quarter when it knocked 0.4 of a percentage point off economic growth.

He said: “Looking through the recent erratic monthly moves in the trade data, there is little evidence overall of marked improvement.”

But the figures will concern Chancellor George Osborne, who has pinned his hopes on an export-driven recovery in the private sector.

The picture is not expected to improve this year as demand from the troubled eurozone weakens, while the strength of the pound makes UK exports less attractive.

Chris Williamson, chief economist at Markit, said: “Trade is unlikely to contribute strongly to UK economic growth in 2012.”