Heavy imports of oil and aircraft affect trade figures

Government hopes that a stronger trade performance will boost growth received a dent today with the news that heavy imports of oil and aircraft pushed Britain’s deficit to a record high late last year.

Data from the Office for National Statistics surprised the City by showing the gap between Britain’s imports and exports widened to £8.7bn in November – the highest since modern monthly records began in 1980.

Analysts had been expecting an improvement in the trade outlook following the stronger performance of British manufacturing during 2010, while ministers are relying on exports compensating for lower government spending and a slowdown in consumer demand as measures to reduce the budget deficit start to bite.

Imports of goods rose from £31.3bn to £32.4bn in November while exports were up from £22.7bn to £23.6bn. The visible trade deficit was offset by a £4.6bn surplus in services leaving an overall shortfall of £4.1bn. In the three months to November – considered a better guide to the trend than one month’s figures – the deficit in goods widened from £24.6bn to £25.7bn and the overall deficit rose from £11.9bn to £12.2bn.

Economists said the underlying picture was rosier than suggested by the headline deficit, which was affected by a big swing in trade in oil from a £21m surplus to a £660m deficit in November and unusually large jump in imports of aircraft worth £441m.

David Kern, chief economist at the British Chambers of Commerce, said: “Longer-term comparisons show satis- factory growth in exports, but the pace of recovery is still not strong enough. The impressive recovery in manufacturing output that we have seen over the past year has not yet been reflected in a major improvement in international trade. Since the government’s austerity measures will inevitably dampen domestic demand, a substantial boost in exports is a key component in any UK recovery.”

Business: Manufacturing sector | guardian.co.uk