Eurozone woes hamper progress on trade deficit

William Hague's call on Britain's firms to "get on the plane" was rewarded with signs of life from exporters yesterday, but efforts to cut the UK's trade gap remain hampered by European turmoil.

Mr Hague, the Foreign Secretary, who launched an attack on business leaders at the weekend for complaining instead of "getting on with the task", will have noted a 6 per cent rise in the UK's overall exports in March, outstripping more modest 2.4 per cent growth in imports. But the UK's overall goods trade gap remains unchanged at £8.6bn, frustrating hopes for a rebalancing of the economy.

A big rise in sales of cars and pharmaceuticals to countries such as China and the US pushed non-EU exports to a record £13.2bn, but this was offset by stagnant exports to Europe and an £800m rise in imports from the Continent, mostly down to rising oil imports.

Howard Archer, IHS Global Insight economist, warned of subdued demand from Europe, the UK's biggest export market: "Of particular concern to UK exporters is likely very weak overall economic activity in the eurozone for some time to come. Furthermore, events in Greece are currently heightening the downside risk to the eurozone economic outlook."

Peter Dixon, Commerzbank economist, said trade was likely to hit overall growth in the third quarter, with the headwinds for British business rising due to a strengthening pound.

He said: "My sense is that we probably got a negative drag from trade in the first quarter. The figures confirm our view that, in terms of visible trade, the UK is still running a chunky deficit, and if sterling were to continue to rise, it's not going to help alleviate that position."