Exports hit record high as UK trade deficit falls
Britain's trade deficit shrank by more than expected in February as exports hit a record high for the second month in a row, figures have revealed.
The deficit in goods - the difference between goods exported and imported - shrank to £6.8bn in February from £7.8bn in January, the Office for National Statistics (ONS) said.
The improvement was due to a 1.3% rise in exports, which hit £25.1bn in February, the highest level since records began in 1980, and accompanied by a 2.2% drop in imports to £31.9bn.
The figures will be welcomed by Chancellor George Osborne, who is relying on the private sector to pick up the slack in the economy as his £81bn package of spending cuts starts to bite.
The UK economy unexpectedly shrank by 0.5% in the final quarter of 2010 and recent surveys have suggested it struggled to bounce back in the first three months of this year.
The Bank of England is sitting on its hands over interest rates - held at 0.5% for 25 months in a row - as it waits to see how the economy fared in the first three months of the year.
Nida Ali, economic advisor to the Ernst -amp; Young Item Club, said: "The rebalancing of the UK economy towards exports seems to be on track and we expect this trend to continue in coming quarters. Indeed, the economic recovery will be heavily dependent on exports over the coming year, given that households are taking a major buffeting and the Government is retrenching."
The deficit on trade in goods and services combined fell to £2.4bn in February from £3.9bn in January, the ONS said.
The figures revealed exports to the European Union (EU) fell in February, but there was a sharp jump in exports to markets outside the EU.
However, global instability could have an impact on trade, with the eurozone debt crisis, rising oil prices, conflict in North Africa and the fallout from natural disasters in Japan, Australia and New Zealand all likely to have an effect.
Howard Archer, UK and European economist at IHS Global Insight, said: "There is a serious risk that global growth could be hit over the coming months by sustained high oil prices while UK exports are also at risk from any sustained problems in the key eurozone market resulting from recurrent sovereign debt problems.
"Supply-chain problems caused by the disruptions to industrial activity in Japan may also affect both UK imports and exports."
The news follows revelations that Ireland had its best-ever year for exports in 2010 - but experts warned the sector alone would not be enough to meet economic targets over the next four years.
Companies traded €161bn (£138bn) worth of goods and services with overseas buyers last year and the Irish Exporters' Association (IEA) expects business to grow by another 7.2% this year.