UK December trade gap wider than expected, record in 2006

Britain's trade deficit with the rest of the world in December widened more than expected and to its biggest since May, official data showed on Friday, as the UK notched its largest annual trade gap on record.

The Office for National Statistics said that Britain's goods trade gap grew to £7.142 billion in December, from £6.871 billion in November and larger than economists' forecasts for a deficit of £6.9 billion.

The ONS said the latest estimate of the trend suggested Britain's trade deficit was fairly flat.

December's figures contributed to the largest annual trade deficit since records began in 1697, with the total trade gap for 2006 widening to £55.8 billion in 2006 from £44.6 billion in 2005.

That came despite a record surplus in services of £28.5 billion last year, compared with £24.2 billion in 2005.

The goods balance, however, registered a record deficit of £84.3 billion last year, from £68.8 billion in 2005.

The goods trade gap with non-EU countries narrowed slightly to £4.308 billion from £4.355 billion in November, just below forecasts for a deficit of £4.4 billion.

Britain's trade figures are heavily distorted by the effects of VAT carousel fraud and economists say the data are therefore an unreliable indicator of what is happening in the economy.