UK trade gap rises to a high of £5.3bn

BRITAIN’S trade gap with the rest of the world rose more than expected in October to its highest level in ten months as imports hit a record monthly high, official figures showed today.

The Office for National Statistics said that the goods trade gap with the rest of the world widened to 5.3 billion, the highest since January, from 4.4bn in September. Economists had predicted a gap of 4.7bn.

Imports were up to a record monthly high of 21.5bn while exports fell slightly to 16.2bn from 16.5bn in September, registering falls across a wide range of manufacturing goods, the ONS said.

The cumulative deficit for the year to date is 34bn, which is 1.2bn worse than the deficit for the whole of 2003.

The trade gap has been on a widening trend in recent months.

Sterling fell half a cent against the dollar after the figures were released, while government bonds and interest rate futures did not react to the figures.

"These figures are yet another disappointing set of UK trade numbers and despite strong global growth over the past year, Britain still can’t seem to close its trade gap," said Philip Shaw, chief economist at Investec.

"It is curious that, given the supposed weakness of domestic demand, import growth remains so buoyant."

In October the balance on trade in oil was in surplus by 0.2bn compared with a deficit of 0.1bn in September, the first monthly deficit since August 1991 when North Sea oil maintenance had depressed exports.

The trade gap with non-EU countries widened to 2.94bn as a result of the lower value of exports of manufactured goods from 2.34bn in September, wider than consensus expectations of a 2.6bn gap.

The ONS said imports from both EU and non-EU countries were at a record monthly level, driven by imports of intermediate and capital goods, chemicals and consumer goods other than cars.

The surplus in trade in services, meanwhile, fell slightly to 1.475bn in October from 1.515bn in September, the ONS said.

In volume terms (excluding oil and erratic items), imports of goods rose between September and October by 3.5 per cent as imports from EU countries increased by six per cent.

Within manufactured goods the picture was a general rise in the volume of imports, with imports of chemicals showing the strongest growth (ten per cent) in the month.