Britain's goods deficit with the rest of the world widened to its second highest on record in May as the UK became a net importer of oil, official figures showed yesterday. A rise in total imports to a record £27.9bn combined with a fall in exports to leave a deficit of £6.8bn, of the Office for National Statistics said.
This was an increase of £1.2bn from April's £5.6bn, making it the highest deficit since February's £7.2bn, which was the highest since records began in 1697.
The increase was driven by a worsening of £521m in the UK's oil position, which switched from a £201m surplus in April to a £320m deficit in May. The UK has been a net importer for 10 of the last 12 months.
Total goods imports rose 3.9 per cent, driven by higher imports of cars, capital goods and aircraft, while exports dipped 0.6 per cent. The ONS said its estimate of the trend was that the gap was widening.
Economists said that as oil only explained half of the worsening in the position, it implied a general decline in the UK's export position. Gavin Redknap, at Standard Chartered, said: "Still sluggish domestic growth on the Continent, in addition to the recent rise in sterling, appears to be undermining the export sector for now at least. If that remains the case, then calls to keep rates on hold will grow louder."
But the ONS warned against interpreting too much from the data, which were still heavily distorted by the multi-billion VAT fraud, known as missing trader intra-community (MTIC) fraud.
There was fresh ammunition for opponents of a rise in interest rates from figures showing retail sales growth slowed in June after two months of strong gains in the run-up to the World Cup.