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Last Updated: Friday, 9 February 2007, 10:28 GMT
UK annual trade gap hits record
Container ship leaving Southampton
Despite exports the trade gap is at a historical record
The UK's monthly trade deficit with the rest of the world grew in December to its biggest since May, as the nation also hit a record annual trade gap.

The Office for National Statistics said the goods trade deficit was 7.14bn ($14bn) in December, as against 6.87bn the previous month.

December's figures helped push the annual trade deficit to its biggest since figures began in 1697.

The total UK trade deficit for 2006 was 55.8bn, up from 44.6bn in 2005.

Ross Walker of RBS said the trade figures are "a little bit worse than expected, a larger deficit than expected".

'Notoriously volatile'

There was a record surplus in services of 28.5bn in 2006, compared with 24.2bn in 2005.

But the goods balance registered a record deficit of 84.3bn last year, from 68.8bn in 2005.

The goods trade gap with non-EU countries narrowed slightly to 4.3bn in December, from 4.36bn in November.

Economist George Buckley at Deutsche Bank said: "The UK trade balance is notoriously volatile and difficult to forecast on a month-to-month basis, which is why Bank of England governor [Mervyn] King has argued that it is pointless to place much weight on the numbers over a short period of time."

However, he added that the deficit in December was bigger than had been expected.

Carousel fraud cracked?

The latest trade figures also reveal a continuing slump in the amount of trade associated with VAT "carousel fraud", which has been a factor in the volatility of the figures.

In December the volume of dishonest trade dropped to just 100m.

This was the lowest monthly figure in 2006 and highlights the collapse in attempted carousel fraud since the early summer - when the government's most recent tax evasion measures started to take effect.

In the whole of 2006 there was 28.7bn worth of trade associated with this fraud, far and away the worst year on record and twice as much as in 2005.

However most of the fraudulent trade took place in the first half of last year, with just 600m of it in the last quarter of 2006.

In last December's pre-budget report Gordon Brown revealed that the Treasury lost between 2bn and 3bn in 2005-06 because of this activity.

That was about 50% more than in 2004-05.




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