Page last updated at 13:06 GMT, Tuesday, 13 January 2009

UK's trade gap hits record level

Container port
Demand for UK exports has slowed

The UK's goods trade gap with the rest of the world reached record levels in November, official figures show.

The deficit stood at 8.33bn, the Office for National Statistics said, up from October's figure, which was revised downwards to 7.631bn.

The trade gap - the difference between imports and exports - with non-European nations also hit a record at 5.30bn.

The worse-than-expected data suggested that the weaker sterling was not enough to boost demand for UK exports.

Slowing demand

"Yet more bad news," said Alan Clarke, UK economist at BNP Paribas.

"The trade figures reinforce expectations that we are going to see a horrific contraction in GDP in the fourth quarter," he added. GDP figures are set to be released on 23 January.

Total exports dropped by 6% in November, with imports down 2% for the month.

A major reason for the slowdown in exports was lower demand from the US.

Overall, with the external sector so weak, policymakers will need to do much more to stimulate domestic activity
Paul Dales, economist at Capital Economics

Hetal Mehta, senior economic adviser to the Ernst & Young Item Club, said the impact of weaker sterling was being "dwarfed by a collapse in world demand".

"Given the extent of the depreciation in the pound in the past few months, today's figures showing such a significant widening of the trade gap are hugely disappointing."

Paul Dales, economist at Capital Economics, added: "The pound is now about 30% below its peak. But with global trade flows subdued, this is unlikely to make much difference, at least in the near term.

"Overall, with the external sector so weak, policymakers will need to do much more to stimulate domestic activity."



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