Economists had expected the deficit to shrink to about £1.6bn.

Analysts say the UK trade gap is likely to widen later in the year

The Office for National Statistics said worldwide exports of British goods in March totalled £13.6bn, unchanged from the previous two months, while imports were worth £15.1bn.

Britain's trade with non-European Union countries was in deficit in April to the tune of £715m, compared with £1.018bn in March and against market forecasts of £1.2bn.

Sterling gained a third of a cent and was up a fifth of a pfennig at DM2.9020 on the back of the figures.

Gloomy forecasts

Analysts said the news was slightly better than predicted but they felt the trade gap was likely to get worse during the course of the year.

"What we're seeing here is a brief respite. The deficit is on a widening trend and that will become more exaggerated as we move through the year," said Ken Wattret of Paribas Capital Markets.

Philip Shaw of South African investment bank Investec, agreed: "The figures are a little better than expectations with both the global and the non-EU deficits narrowing somewhat from the previous month.

"But the prospects are for the trade deficit to deteriorate further over the coming months."

Royal Bank of Scotland economist, Neil Parker said: "Scratching the surface, the EU deficit for March was still much higher than it has been recently, implying that there could be some lagged effects of sterling strength against Europe feeding through."