Consumer boom produces record UK global trade deficit
The UK notched up a record global goods trade deficit last year, casting fresh doubt on the Bank of England'sforecast for a turnaround in exports.
Britain imported £65.5bn more goods than she exported, which was equivalent of 5.4 per cent of GDP - making it the worst deficit in real terms since 1974, the Office for National Statistics said yesterday.
There was little relief from December's figures, which showed the deficit widened unexpectedly by £100m to £6.1bn - another all-time record - compared with forecasts of £5.6bn. The monthly downturn was caused by an underlying deterioration in trading, rather than one-off hits from oil or erratic items, which analysts said should worry the bank.
"The economy is unlikely to rebalance away from the consumer sector and towards the external sector any time soon," said Paul Dales, UK economist at Capital Economics.
"These data are a stark reminder to the Monetary Policy Committee that the economy is still dangerously reliant on the consumer sector, which still has problems of its own."
Both imports and exports hit record levels, but even a 9 per cent surge in overseas sales was not enough to offset a surge in import prices.
Export prices rose by just 1.5 per cent over 2005, less than half the 3.5 per cent jump in the price of imported goods.
The figures inflamed concerns that the UK is unable to capitalise on the rebound in global growth, especially in the eurozone.
The deficit with the European Union hit a record of its own of £34bn despite a narrowing in December's deficit to £2.9bn from £3.0bn.
"It looks like the UK economy is not able to take advantage of the eurozone expansion and global growth at the moment," said Lorenzo Codogno, co-head of European economics at Bank of America.
"This might be an indication of more fundamental problems in the UK economy that are not related to the exchange rate or the strength of external demand."
The Treasury said there was "positive" news from a 14 per cent surge in exports to non-EU states, with sales to China posting a 19 per cent increase, albeit from a small base.
A spokesman said last year saw a "significant slowdown" in the EU, the UK's main export market, alongside an oil price shock.
"Despite this, UK export volumes grew 7.5 per cent in 2005 as the economy continued to grow in every quarter. And, as the UN made clear a week ago, the UK was the world's number one destination for Foreign Direct Investment in 2005."
The figures also showed the UK recorded its first annual deficit in oil, at £670m, since the early days of North Sea oil in 1979, compared with a £1.7bn surplus in 2004.
This was despite a swing back into a £333m surplus in December, which implied that the deterioration in trade over the month was due to underlying factors.
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