UK imports at record monthly high

Demand for UK goods fell outside the EU

The UK's trade gap widened sharply in October, as imports hit a record monthly high of £21.5bn.

The trade-in-goods deficit deteriorated sharply to £5.3bn, from £4.4bn in September, much higher than analyst forecasts of a £4.7bn gap.

The Office for National Statistics (ONS) blamed a 7.5% drop in non-EU exports for the gap, which was partly attributed to sterling strength.

The trade gap so far this year is £34bn, £1.2bn more than the 2003 gap.

These figures are yet another disappointing set of UK trade numbers and despite strong global growth over the past year, Britain still can't seem to close its trade gap Philip Shaw, Investec

Fewer exports

A breakdown of the data shows that the UK's trade gap with the European Union (EU) grew to £2.4bn in October from £2.1bn a month earlier.

The deficit with non-EU countries jumped to £2.9bn from £2.4bn as the UK exported less manufactured goods, despite stronger global growth. This is partly because a strong pound, worth almost $2, has made the cost of UK goods prohibitive.

The country's surplus on trade in services remained steady for the fourth month in a row at £1.5bn.

The country's oil balance moved back into surplus after registering its first deficit in 13 years in September. The deficit was largely attributed to maintenance work on North Sea rigs hitting production.

Trouble ahead?

"These figures are yet another disappointing set of UK trade numbers and despite strong global growth over the past year, Britain still can't seem to close its trade gap," Philip Shaw at Investec added.

Weak manufacturing data earlier this week, and a slowdown in consumer spending as the year's four interest rate rises bite could all contribute to a slowdown in the UK economy, Capital Economics UK economist Paul Dales said.

"There is still a concern that overall GDP growth will slow sharply next year," Mr Dales added.

While the ONS figures may mean trouble ahead for the UK economy, they could spell good news for home owners.

"We think UK rates will have to be reduced towards the end of next year," Kamal Sharma, currency strategist at Dresdner Kleinwort Wasserstein said.