Export hope in trade balance fall

Exporters are benefiting from a stronger world economy

Britain's current trade deficit with the rest of the world reached £18.8bn in 2003, up from £17.8bn in 2002.

The Office for National Statistics (ONS) said the quarterly deficit narrowed to £5.2bn, down from £6.3bn.

And exports of goods rose for the first time in the year, and the yearly gap in manufactures declined slightly.

Separate figures from the ONS showed that the economy had grown by 2.2% in 2003,compared with an earlier figure of 2.3%

Export hopes?

The ONS figures showed the in the three months between October and December, the UK imported £59.7bn of goods, while exporting only £47.1bn.

The UK is importing more and more manufactured goods like cars

But Britain's surplus in oil, trade in services, and investment income from abroad narrowed the gap.

And overall, the trade gap in manufactured goods narrowed for the first time in five years.

The government is hoping that a revival in manufacturing exports, will help "rebalance" the economy and allow consumer demand fed by high house prices to slow gradually.

And the figures give some hope that the revival in the world economy is benefiting British manufacturers.

The growing trade gap had also been worrying the currency markets, who were expecting a much bigger figure for the fourth quarter.

A large trade gap could potentially cause a run on the pound, and force the Bank of England to raise interest rates.

"The current account data certainly came as a pleasant surprise; it won't do much for sterling but it creates less pressure in terms of the exchange rate," said Marc Oswald of Monument Securities.

Nevertheless, many economists expect the Bank of England to continue to raise interest rates to cool the housing boom.

Although the ONS revised downwards its growth estimates for both 2002 and 2003, it said the economy was now growing at a 2.7% rate, close to or above its long-term capacity.