Record exports ease fears of an EU trade collapse

Exports hit a record £25.5 billion in August despite the chaos gripping global markets, temporarily quelling fears of a collapse in trade with the crisis-torn eurozone.

The nation's goods gap with the rest of the world surprisingly narrowed by £400 million to £7.8 billion during the month, far better than the £8.9 billion deficit pencilled in by the City.

The UK's overall deficit narrowed to £1.9 billion in August. After decent July figures, this should mean that net trade adds to growth between July and September after dragging down the economy in the second quarter.

The record export performance was driven by sales of so-called intermediate goods - mechanical parts and electrical components used in other machinery - as well as food, drink and tobacco. Exports to the European Union, the country's biggest trading partner, grew 2.8% to £14 billion, compared with a 1.3% slide in imports from the region, which is still in the grip of a sovereign debt crisis.

But analysts were sceptical over a sustained revival. ING Bank economist James Knightley said: "Goods exports have risen to an all-time high, despite intensifying recession fears, while imports fell marginally.

"We struggle to see this lasting given intensifying recession fears in the eurozone and a generally weak global growth environment, but it is good news for now."

Nida Ali, economic adviser to the Ernst & Young ITEM Club, said: "the prospects for UK trade have dimmed considerably...With Greece likely to default around the turn of the year, the UK's trade position remains highly vulnerable to the ensuing consequences."