Surge in exports helps cut non-EU trade gap

Hopes of a rebalancing of the UK's trade position were boosted yesterday by figures showing that the deficit with non-European Union countries narrowed last month. The trade gap fell to £1.8bn from January's record £2.4bn as exports rose sharply and imports fell.

There was also good news in global trade in January, with the deficit narrowing from a record £2.9bn in December to £2.7bn. The global improvement was driven by a record £1.03bn export surplus in services, offset by a record £21.32bn in imports.

Economists said the figures were welcome but should be treated with caution, especially against the background of the strong pound. The Office for National Statistics, which compiled the data, warned that the trend was for a widening deficit.

Dharshini David, an economist with HSBC, said: "The trade in goods deficit reached record levels last year and is only likely to deteriorate further in 2000, pointing to a current deficit of about £20bn this year." This would match the Treasury's forecasts in the Budget.

Geoffrey Dicks of Greenwich NatWest said the non-EU performance in February was "exceptionally" good. "We do not know at this stage whether the figures were just freakishly good or whether it is all-round strong global demand that is offsetting the strength of sterling."

The breakdown for February showed a rise in exports across the globe, with £100m in extra exports to South-east Asia and the US and £50m more to Australia and India.

James Carrick of ABN Amro said non-EU export growth was linked to the pound's fall against the dollar, and the general outlook was unchanged. "Exporters are struggling to cope with sterling's strength and robust domestic demand is sucking in cheaper imports."