UK trade deficit hits record high

The strong pound is hitting exporters

Britain's trade deficit with the rest of the world hit a record high during January, official figures have shown.

The Office for National Statistics (ONS) said the deficit in goods and services reached £4.6bn, compared with a £3.1bn deficit in December.

Exports to the US fell sharply, which experts said could be due to the pound's strength against the dollar.

Separate figures from the ONS showed manufacturing production rose by a weaker-than-expected 0.2% in January

Exporters suffering

The ONS figures showed the trade gap in goods alone was £5.6bn in January - also a record high.

"From today's awful trade data the problem is on the export front," said Geoffrey Dicks, economist at RBS Financial Markets.

"Exports of manufacturers fell 8% in January, while imports edged higher.

"The combination of a strong pound and weak demand from principal trading partners does nothing to help."

The pound has appreciated sharply against the dollar since the start of September, as the US currency has fallen back against most major currencies.

Manufacturing woe

The 0.2% rise in manufacturing output during January was below analysts' estimates of 0.5% growth.

However, the small gain was enough to lift the annual rate of increase to 1.5% from 0.9%.

Recent surveys have suggested the sector is emerging from its prolonged downturn, but official figures show firms are still struggling.

"The actual hard data continues to be significantly weaker than the picture of the sector portrayed by the survey evidence," said Howard Archer, an economist at Global Insight.

"We continue to believe that the true state of the manufacturing sector lies somewhere between the two.

"What is clear though is that the manufacturing sector could do without a further rise in interest rates, particularly if that contributes to further sterling strength."

Last week the Bank of England decided to keep interest rates on hold at 4%, but many analysts are expecting rates to rise later this year to keep the housing market in check.