The December upswing in import prices was the third monthly rise in a row, following sterling's devaluation last September.
Higher prices pushed up the value of imports in December to a record pounds 10.91bn. A new peak of pounds 31.82bn was set for the fourth quarter of 1992 and the total import bill for 1992, of pounds 120.55bn, was also an all-time high.
But export earnings also hit new records. In the latest quarter, the value of exports rose by more than pounds 1bn to pounds 27.51bn, taking the value of exports for 1992 to a new peak of pounds 106.77bn.
According to figures from the Export Credit Guarantee Department, Britain's capital goods exports could be about to surge. The ECGD, the government department that insures large exporters against non-payment, said that in the six months to October it made commitments covering pounds 4bn of sales, compared with a total of pounds 2.1bn insured in the whole of the 1991/2 financial year.
Excluding trade in oil and erratic goods like ships, aircraft and precious stones, the underlying trade deficit widened by more than pounds 200m to pounds 1.85bn. In the three months to December, the underlying deficit surged by pounds 700m to pounds 4.9bn.
But there were grounds for modest optimism. Excluding trade in oil and erratics, export volume rose 4 per cent in the three months to December while import volume edged up by 0.5 per cent.
The devaluation of the pound drove up import prices by 9 per cent in the latest three months. Exporters have also taken advantage of the weakness of the pound, raising their sterling prices by 3.5 per cent in the period.
Despite hopes of a surge in exports, analysts said that the worrying increase in import penetration suggested that even during the recession, foreign companies had captured more of the home market at the expense of domestic producers.
The data suggested that UK manufacturers offered consumers an inadequate range of products, and may buttress the case for measures to support industry and encourage an expansion of Britain's manufacturing base.
Richard Brown, of the British Chambers of Commerce, said: 'Consumers continue to look overseas for their goods at a time when only one in five UK companies are working to full capacity.'
City calls for action to assist industry have been matched by several of the 'seven wise men', the panel of outside economists appointed last year to advise the Treasury on economic policy.
Officials at the Central Statistical Office estimated that it would take several more months for the impact of Britain's substantial gain in price competitiveness to feed into exports. By contrast, they believe that the bulk of the devaluation-inspired rise in import prices has already fed through.
However, it will be six months before these trends can be discerned. Yesterday's figures were the last complete trade statistics to be issued until mid-June. Following the advent of the single European market and the abolition of customs barriers on 1 January, trade statistics throughout the EC are now gathered on a VAT basis instead of the traditional customs basis, resulting in several months' delay before publication.
Commenting on export prospects, Brian Willott, the ECGD's chief executive, said that not all the recent export credit commitments would be taken up, but the indications are that capital exports both this year and next could be 50 per cent up on last year's level. The main area of success remained the Far East, with Hong Kong a particularly good market. As the ECGD insures only large projects with long-lead times, the figure has not been affected by the fall in the value of sterling.
The ECGD, which announced its results for the year to April 1992 yesterday, continues to insure risks that cannot be taken by the private sector, even though the bulk of the business, the short-term credit insurance division, was sold to the Dutch company NCM in December 1991.
Of the pounds 2.1bn of capital goods and projects insured by the ECGD in 1991/2, Malaysia took pounds 689m, or more than a quarter. Half of this was used to support a hydro-electric power station being built by Balfour Beatty and Cementation. The next biggest markets were China, South Africa, Turkey, Indonesia and Mexico.Reuse content