Non-EC trade gap widens: Britain's deficit with rest of the world grows by 30% to pounds 778m

BRITAIN'S trade gap with countries outside the European Community widened by 30 per cent in July to pounds 778m, the Central Statistical Office said yesterday. But it revised down the deficit between January and June by more than pounds 440m.

City economists were sanguine about the unexpectedly large deterioration in July, with most forecasting that the full-year current account deficit with the rest of the world would come in under the Government's pounds 17.5bn budget prediction. July's trade gap was the largest since April and compared with City forecasts of pounds 700m.

The trend improvement in the non- EC trade gap since the turn of the year has slowed with the publication of the July figures. Exports fell by 1 per cent in July while imports rose by 2.4 per cent. The Treasury said the underlying trend remained favourable.

Excluding oil and erratic items - such as ships, aircraft and precious stones - the trade deficit widened from pounds 553m in June to pounds 713m in July, with both imports and exports rising from June's levels.

Export volume was more than 4 per cent down on the month on this basis, but was 2.5 per cent higher in the last three months than in the previous three months. Import volume rose by 1.2 per cent in July, but was only 0.5 per cent higher on a three-month on three-month basis. Export volume has been growing at a faster trend rate than imports since the spring.

The Confederation of British Industry said the trend in exports - boosted by the fall in the pound since Black Wednesday but hindered by its rise since March - remained encouraging. 'However, the majority of the UK's trade is with countries inside the EC, and CBI surveys have suggested that weak European markets could be holding back overall export growth,' a spokesman said. More than half Britain's trade takes place with other EC countries.

Both import and export prices rose sharply in July, but the figures are very erratic. Export prices rose by 6.4 per cent on the month, twice the increase for import prices. The CSO is looking to collect data on export prices directly in the same way that it collects factory gate prices.

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