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Britain's trade gap narrows as imports shrink

January 12, 2010 | "Times Online"

Britain’s goods trade deficit with the rest of the world narrowed more than expected in November, as the level of imports from trading partners outside Europe dropped.

The figures are likely to add to growing hopes that Britain's economy returned to growth in the fourth quarter of the year. The UK is the only major economy still mired in recession - the longest downturn since records began.

The Office for National Statistics (ONS) said that Britain’s global goods trade gap narrowed from £7 billion in October to £6.8 billion in November, well below expectations that the gap would remain flat at £7 billion.

The reduction in the deficit was helped by a sharp drop in imports of £200 million, or 0.8 per cent, to £27 billion. Exports remained broadly flat at £20.2 billion.

However, the total figure masked an underlying difference between trade with the European Union and with countries outside the EU, such as the United States and China.

The goods trade gap with the EU — Britain’s biggest trading partner — actually widened to its greatest since January 2008 at £3.75 billion, while that with non-EU countries was its narrowest since November 2005 at £3.03 billion.

Although exports to the EU did increase, imports increased by even more, down mainly to continuing strong demand for European-made cars thanks to the Government's car scrappage scheme.

The overall deficit on goods and services trade narrowed from £3.1 billion in October to £2.9 billion in November, as the long-running surplus on trade in services held steady at £3.9 billion.

Howard Archer, the chief UK and European economist for IHS Global Insight, said: "This eases concern that net trade held back the economy's probable return to growth in the fourth quarter."

He added: "Sterling's weakness and improved activity in key overseas markets, including the US and the eurozone, are helping matters.

"We are still hopeful that exports will increasingly benefit from sterling's weakness and improving global growth and trade in 2010. Nevertheless, the process is still proving disappointingly slow."

By Robert Lindsay

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