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RPT-UPDATE 1-UK Nov trade gap narrows thanks to non-EU business

Published 01/12/2010, 05:13 AM

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LONDON, Jan 12 (Reuters) - Britain's goods trade deficit with the rest of the world narrowed more than expected in November, after the country's deficit with non-EU countries fell to its lowest since late 2005, official data showed on Tuesday.

The Office for National Statistics said that Britain's global goods trade gap narrowed to 6.784 billion pounds in November from 7.016 billion in October, after imports dropped 0.8 percent over the month while exports rose 0.1 percent.

Economists had forecast a deficit of 7.0 billion pounds.

"The data was a pleasant surprise," said Alan Clarke, economist at BNP Paribas. "It's probably going to help to get GDP to expand in the fourth quarter. I think there's a lot more good news to come from the export side. The weakness of the pound hasn't shown through yet."

However, others were less impressed.

"The UK trade figures continue to disappoint," said Vicky Redwood at Capital Economics. "Although the trade deficits narrowed slightly in November, they reversed only a small part of the deterioration seen over the previous couple of months."

There was no significant market reaction.

Britain's economy remained in recession in the third quarter while most of its main trading partners grew. Policymakers want to see future growth driven by exports, rather than the consumer credit-led boom of most of the previous decade.

The global figure masked a difference in trends between Britain's trade with the European Union and non-EU countries.

The goods trade gap with the EU -- Britain's biggest trading partner -- was its largest since January 2008 at 3.752 billion pounds, while that with non-EU countries was its narrowest since November 2005 at 3.032 billion. Analysts had forecast a deficit of 3.4 billion pounds.

The data showed that one factor in the widening of the EU trade gap was higher car imports from the EU as a result of the government's car scrappage incentives.

For non-EU countries, an increase in British exports of consumer goods and chemicals, and a corresponding fall in Britain's imports of these goods, lay behind much of the narrowing in the trade gap.

The ONS said that HM Revenue and Customs would publish revisions to historical overseas trade data on Jan. 19, due to errors in traders' original declarations.

In past years, British trade data has been noticeably distorted by cross-border value-added tax fraud. (Reporting by David Milliken and Matt Falloon; editing by Stephen Nisbet)

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