UK trade gap widens

Britain is exporting less to countries outside the EU

Britain's trade gap with countries outside the European Union widened sharply in August.

Exports to non-EU countries fell to £6.3bn ($9.2bn) from £6.7bn the previous month, while imports rose to £9.3bn from £9.2bn.

The fall in exports has been particularly marked to the United States, Switzerland and Japan, over the past three months.

In total, Britain's trade deficit with non-EU countries was £3bn, up from £2.5bn in July, according to the office for National Statistics.

Underlying picture

The global goods trade deficit, which includes trade with EU countries, came in at £2.5bn for July, the latest month for which figures are available.

This compares with £3.4bn in June and was in line with expectations.

Richard Iley, economist at ABN AMRO bank, said he believes the underlying picture is actually rather worse than recent data might suggest, and has been flattered by the figures in recent months.

"This August's non-EU figure may herald a return to continued deterioration in trade trends," he said.

The Office of National Statistics estimates that the country's trade position will continue to worsen, but its public finances will remain healthy.

As a major trading nation, Britain has been suffering from a fall in world demand and a continued strong exchange rate.

The stock markets reacted badly to the figures, with the FTSE 100 index of leading 112 points adrift at 4,609.

Mortgage lending

Meanwhile, mortgage lending in the UK hit a new monthly record of £16.7bn in August, as the housing market continued to boom.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "The CML continues to expect slower growth next year, despite the continuing apparent strength of the current lending market.

"If anything, the fallout on the economy and the consumer confidence of the terrorist attacks in the United States may even tend towards slowing the market down more than we have previously thought."

The remortgaging market could receive a boost, he added, as people take advantage of low fixed rates and other special deals following the latest cut in interest rates.