UK trade deficit widens to record as imports surge

LONDON - The UK trade deficit on goods widened to a record in September as imports of chemicals and oil increased and exports barely rose.

The goods-trade gap grew to 9.81 billion pounds ($15.8 billion), the most since the data series began in 1998, from 8.62 billion pounds in August, the Office for National Statistics said on Wednesday in London. The August deficit was revised from an initially reported 7.77 billion pounds. Imports increased 3.8 percent to a record and exports rose 0.2 percent.

The Confederation of British Industry (CBI), the UK's biggest business lobby, cut its growth forecast on Wednesday as the debt crisis in Europe weighs on export demand. The Bank of England expanded stimulus last month and will probably maintain the target for asset purchases on Thursday, economists in a Bloomberg News survey forecast.

"Exports should be one of the main engines of growth for the UK and so far it has been quite weak," Joost Beaumont, an economist at ABN Amro Bank NV in Amsterdam, said before the release. "Global growth is slowing, so it's a bit of a downward spiral we're in and it's up to mostly politicians in the eurozone to break that deadlock. It depends on Europe."

The pound extended its decline against the dollar after the report was published.

Imports rose to 34.3 billion pounds in September, driven by chemicals and oil and silver, the statistics office said. By volume, the increase was led by chemicals, which rose 7.8 percent, pharmaceuticals and consumer goods other than cars. Within consumer goods, imports of works of art, which includes antiques, surged by about 200 million pounds, or 131 percent.

The increase in exports on a value basis was driven by oil and cars, which was offset by a decline in chemicals and consumer goods, the statistics office said.

The deficit on goods and services widened to 3.94 billion pounds in September from 2.73 billion pounds in August. In services alone, there was a surplus of 5.87 billion pounds.

Invensys PLC, the British maker of railway software and washing machine controls, said on Nov 3 that it "made a solid start to the year despite the uncertain macroeconomic climate around the world". Orders benefited from emerging markets, which are "expected to be less affected" by the global environment.

The CBI said on Wednesday that the UK economy will grow 1.2 percent in 2012, down from a previous projection of 2.2 percent.

All 38 economists in a Bloomberg survey forecast the Bank of England will keep the target for its bond purchases at 275 billion pounds on Thursday. The central bank will also keep its key rate at a record-low 0.5 percent, said all 52 economists in another survey.

Bloomberg News