Exports hit record high

Britain's trade deficit shrank by more than expected in February, as exports hit a record high for the second month in a row.

The deficit in goods - the difference between goods exported and imported - shrank to 6.8 billion in February from 7.8bn in January, according to new data from the Office for National Statistics (ONS).

The improvement was due to a 1.3 per cent rise in exports, which hit 25.1bn in February, the highest level since records began in 1980, and accompanied by a 2.2 per cent drop in imports to 31.9bn.

The figures will be welcomed by Chancellor George Osborne, who is relying on the private sector to pick up the slack in the economy as his 81bn package of spending cuts starts to bite.

The UK economy unexpectedly shrank by 0.5 per cent in the final quarter of 2010 and recent surveys have suggested it struggled to bounce back in the first three months of this year. Two consecutive quarters of contraction in the economy would officially place the UK in recession.

Nida Ali, economic adviser to the Ernst & Young ITEM Club, said the trade figures were very encouraging.

"The rebalancing of the UK economy towards exports seems to be on track and we expect this trend to continue," she said.

"Indeed, the economic recovery will be heavily dependent on exports over the coming year, given that households are taking a major buffeting and the government is retrenching."