Britain's goods trade deficit with the rest of the world widened more than expected in December, official data showed today, as the UK notched its largest annual trade gap on record.
The pound extended losses after the figures, hitting a one-month low against the dollar, with analysts suggesting the widening gap would weigh on economic growth.
The Office for National Statistics said Britain's goods trade gap grew to £7.142 billionin December, from £6.871 billion in November, and against forecasts for a deficit of £6.9 billion.
The deterioration was driven by a 1.2 per cent fall in exports and a 0.2 per cent rise in imports. There have been concerns that a strong pound, which has recently hit 14-year highs against the dollar, would dent demand for British goods.
The ONS said the latest estimate of the trend suggested Britain's trade deficit was fairly flat. December's figures contributed to the largest annual trade deficit since records began in 1697, with the total trade gap for 2006 widening to £55.8 billion pounds in 2006 from £44.6 billion in 2005.
That came despite a record surplus in services of £28.5 billion last year, compared with £24.2 billion in 2005. The goods balance, however, registered a record deficit of £84.3 billion last year, from £68.8 billion in 2005.
Total exports and imports also set respective records last year. The goods trade gap with non-EU countries narrowed slightly to £4.308 billion pounds from £4.355 billion in November, just below forecasts for a deficit of £4.4 billion pounds.
Britain's trade figures are heavily distorted by the effects of widespread VAT fraud which one report suggested cost the government nearly 8.5 billion pounds in the year to June 2006, a figure London disputes. Economists say the data are therefore an unreliable indicator of what is happening in the economy.