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Wednesday, November 25, 1998 Published at 11:40 GMT

Business: The Economy

UK trade deficit worst ever

Exports have collapsed

The UK's trade deficit has exploded to its worst ever level as the strong pound and a slowdown in the world's economy continue to take their toll on beleaguered exporters.

The UK's balance of trade in goods with countries around the world slumped to £2.5bn deficit, almost double the trade deficit recorded in August according to official figures from the Office for National Statistics.

More rate cuts?

The figures were much worse than City experts had predicted.

Trade with Asia has been particularly badly hit by the turmoil in the world's financial markets.

Economists at the Royal Bank of Scotland said the figures illustrated the difficulties facing manufacturing exporters and could increase the chances of a further cut in interest rates by the Bank of England in December.

"But we feel the Bank will leave rates on hold unless there is a further economic or financial shock," they said.

Asian slump

The UK's manufacturing exports have been badly hit by the slowdown in Asia together with the strong pound.

Official government figures recently showed that the UK's trade deficit with non-EU countries had widened to a record £1.9bn ($3.2bn).

The volume of exports fell by 6.5% to its lowest monthly level since December 1996.

"Not immune"

In a separate survey, the Confederation of British Industry (CBI) have also showed that manufacturing export orders in September had fallen to their lowest level in 15 years.

The CBI said that total export orders had plunged to their lowest level in five and a half years.

UK trade minister Brian Wilson said economic conditions in Asia are having "a serious negative impact" on overall trade figures.

He added: "Global economic problems, particularly in Asia, continue to have a serious negative impact on the overall figures.

"We cannot expect to be immune from these events, despite the determined efforts of many British companies.

"The harsh reality is that exports to Indonesia, Malaysia, Philippines, South Korea and Thailand have fallen by more than half in the last year while exports to Japan and Russia are down by more than a quarter."

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