Trade deficit 1bn pounds worse than feared

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BRITAIN'S trade last year was pounds 1.1bn deeper in the red than first thought and the country's net holdings of overseas assets - such as shares in foreign companies - were less than half the figure estimated in the Budget, the Central Statistical Office said yesterday.

The current account deficit in 1991 was pounds 6.32bn - equivalent to 1.3 per cent of national output - according to the CSO's Pink Book report on the balance of payments. The deficit had originally been estimated at pounds 5.2bn.

The deficit is still the smallest since 1987 and barely a third the size of the shortfall in 1990. But - in contrast to the early 1980s - recession has failed to dampen spending on imports sufficiently to push Britain's trade back into the black.

The upward revision of last year's deficit reinforced some analysts' fears that when economic recovery does finally get under way it will soon be constrained as the revival in consumer spending sucks in imports. But the Treasury said the revisions were of little significance.

The surplus on trade in 'invisible' goods - such as insurance and tourism - was nearly pounds 950m smaller than first estimated at pounds 3.97bn in 1991, the CSO said. But this was still the biggest surplus since 1988.

The balance of interest, profit and dividend payments flowing into Britain was pounds 329m, rather than the previously estimated pounds 898m. The balances on sea and air transport were also less favourable than first thought.

The 1991 deficit on trade in 'visible' goods was revised upwards by a relatively small pounds 171m to pounds 10.29bn. This was the smallest deficit since 1986, and down from pounds 18.8bn in 1990.

The CSO also painted a more depressing picture of Britain's holdings of foreign assets, such as overseas subsidiaries of British companies and shares in foreign companies held for investment purposes. Britons held pounds 950bn of overseas assets at the end of last year, compared with pounds 934bn of British assets held by foreigners. But the pounds 16bn net holding was less than half the pounds 37bn estimated in the Budget Red Book.

The CSO also substantially revised the figures for net overseas assets at the end of 1990, showing for the first time that Britain was a net debtor in that year.

Statisticians believe the net overseas assets figure of minus pounds 407m in 1990 was the only year since about 1950 in which foreigners held more British assets than Britons held foreign assets. Four years previously Britain had net overseas assets of pounds 100bn.

In the Budget, the Treasury estimated that Britain held about pounds 20bn in net overseas assets at the end of 1990, a figure itself revised down from the pounds 30bn in last year's Pink Book.

The CSO said estimates of net overseas assets were revised down because foreign ownership of British companies was higher than previously estimated. British companies have also written down the value of their overseas investments by eliminating goodwill from the balance sheets of overseas acquisitions.

The calculation of assets and investment flows is notoriously prone to revision. They can also be misleading because asset holdings are recorded at purchase, rather than market, prices.

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