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UK Trade Deficit Rises As ECB Doubts Growth

(c) Sky News 2012

Britain saw its trade deficit hit a record high in June, as the nation struggled to boost industry growth and demand for manufactured goods abroad.

According to figures from the Office for National Statistics ( ONS ), the trade deficit widened from £2.7bn to £4.3bn, the largest since records began in 1997.

It follows a sharp drop of 7.4% in exported goods.

The ONS report also revealed the total goods and services trade deficit rose from £7.8bn to £11.2bn in the second quarter of the year.

The expanding deficit comes as UK exports have been hit by slowing global demand amid the on-going eurozone crisis.

The ONS said that while exports of traded goods to EU countries fell by 7.2% month-on-month in June, they were down by an even larger 9.2% to non-EU countries.

The figures show Britain's battle to tap into trade with emerging markets such as India and China.

David Kern, chief economist at the British Chambers of Commerce, explained: "There is no question that British exporters are facing major challenges as a result of problems in the eurozone, but the rebalancing of the UK economy towards exports is taking too long."

He added: "British exporters have untapped potential to expand, but they need more Government support to help them compete globally and diversify towards growing markets outside the EU."

The news follows the European Central Bank's (ECB) decision to slash its economic growth outlook for the next year.

The bank said: "Looking beyond the short term, the Governing Council expects the euro area economy to recover only very gradually, with growth momentum being further dampened by a number of factors."

It predicted a growth contraction of 0.3% this year, which is slightly worse than its previous forecast of 0.2%.

The bank also cut expectations for growth in 2013, estimating it at 0.6% - down on the 1% prediction it gave in the last report.