UK trade deficit hits record £34bn in first 10 months

Britain has already racked up its largest annual trade deficit for more than three centuries this year, government statisticians said.

Britain has already racked up its largest annual trade deficit for more than three centuries this year, government statisticians said.

The trade gap with the rest of the world has surged to £34.0bn over the first 10 months of the year, outstripping the £32.8bn deficit in 2003, which was the largest shortfall since records began in 1697.

Nothing short of a miraculous return to surplus in the remaining eight weeks of the year can prevent the deficit from reaching a new trough.

The numbers for trade in goods alone were more staggering, with a deficit so far this year of £48.8bn, up on the £47.4bn in 2003, the Office for National Statistics said yesterday. The record was breached by an unexpectedly large £1bn rise in the deficit in October. The overall balance rose to £3.8bn from £2.9bn as the goods gap widened to £5.3bn from £4.4bn.

The widening in the deficit was driven by a record surge in imports and a slump in exports to outside the European Union.

News of the figures hit the pound as analysts warned the ballooning of the deficit would hit the currency in the same way that US deficits have hit the dollar. Sterling fell as much as 1 per cent to the dollar and dropped against the euro.

Alan Castle, UK economist at Lehman Brothers, said October's deficit was about 5.5 per cent of nominal GDP on an annualised basis. "So far, the current account has not shown signs of widening beyond about 2 per cent of GDP," he said. "But, given the volatility of these series, we would not rule out a blowout current account figure in the next few quarters that could put significant pressure on the exchange rate."

Britons sucked in a record £21.5bn of imports in the month, thanks mainly to a 6 per cent increase in purchases from other EU countries. At the same time, exports to non-EU countries fell 8.5 per cent.