UK trade deficit hits record high

Imports of oil and aircraft pushed Britain's trade deficit to a record high in November. Britain's goods trade gap for the month widened to £8.7bn from an upwardly revised £8.6bn in October. This was the biggest deficit since monthly records began in January 1980, confounding City expectations of a narrowing. This was mainly due to an oil deficit of £660m in November compared with a rare surplus of £21m in October. However, once volatile items such as oil and aircraft are stripped out, the deficit narrowed from October's record figure thanks to a sharp rise in car exports. "These figures are mixed with a slight increase in the overall size of the trade deficit. But the underlying trends are positive, with the volume of exports rising at a faster rate than the volume of imports in November," said David Kern, chief economist at the British Chambers of Commerce. "Longer-term comparisons show satisfactory growth in exports, but the pace of recovery is still not strong enough. The impressive recovery in manufacturing output that we have seen over the past year has not yet been reflected in a major improvement in international trade." Both exports and imports hit record highs in value terms in November. Oil imports surged by £1bn, only partially offset by oil exports of £342m. Imports of aircraft and aircraft parts increased by £441m on the month, while exports of cars rose by £353m. The fall in sterling since mid-2007 has raised hopes of a "rebalancing" in the economy away from its reliance on domestic demand. Manufacturers have reported strong export demand in industry surveys. Alan Clarke, UK economist at BNP Paribas, said: "Going forward we expect exports to improve further, especially given signs of buoyancy in key trading partners such as Germany. Meanwhile, the likely softening in domestic demand on the back of public sector spending cutbacks and sluggish household consumption should reduce demand for imports. "The bottom line is we continue to expect net trade to be one of the biggest contributors to growth this year, but it is unlikely to be an overnight turnaround – and clearly these latest figures confirm that." The total trade deficit, including both goods and services, climbed to £4.1bn from £4bn, the highest since August. Kern urged exporters to step up efforts to move into fast-growing emerging economies such as India and China. "It is risky for the UK to rely excessively on the eurozone given the problems it faces as a result of the sovereign debt crisis."