Revival hopes foiled as trade gap widens

Hopes of an export-led recovery from recession were dashed today as official figures showed the trade deficit rocketing to yet new records.

Exports to the eurozone were particularly bad, falling by 2.5% in July while exports to countries outside the EU were down 0.4%.

As exports were falling, imports of chemicals and oil surged, creating an overall goods trade deficit with the rest of the world of £8.67 billion from £7.53 billion in June. That was the worst goods deficit since records began in 1998.

Analysts had expected the figure to be broadly unchanged on June. With consumers at home rattled by rising unemployment and the prospect of big public-sector cuts, the Government and Bank of England have been counting on exports to help drive the economy's growth.

But today's data, described as "desperately disappointing" by IHS Global economist Howard Archer, showed that was becoming increasingly unlikely as exporters continue to struggle despite the weak pound and improvements in world trade elsewhere.

Peter Elias, professor of economics at the University of Warwick, said: "It is very worrying and shows we are not in a powerful situation like India and China with buoyant economies that can bounce back with huge exports."