UK trade gap narrows in October, construction lacklustre

(Adds industry reaction)

By David Milliken and Costas Pitas

LONDON, Dec (Shanghai: 600875.SS - news) 9 (Reuters) - Britain's trade deficit narrowed more than expected in October but overall there was little sign exports were getting much help from sterling's fall since Britain voted to leave the European Union in June, data showed on Friday.

The official figures also showed a fall in construction output which, along with industrial production figures earlier this week, offered a less cheery picture of the economy than upbeat business surveys.

The trade deficit in October narrowed to 1.971 billion pounds ($2.5 billion) from 5.812 billion pounds in September, the narrowest figure since May. The deficit in goods alone was lower than all forecasts in a Reuters poll.

But the data for October was overshadowed by big upward revisions to the deficit in the previous three months. The Office for National Statistics said on Tuesday it had been misclassifying trade in gold since January 2015.

While that meant Britain's record current account deficit was a bit smaller than thought in 2015 and early 2016, the trade deficit in the three months after June's vote ballooned to 14.9 billion pounds, its largest since late 2013.

"There remains only limited evidence so far that the depreciation of sterling has led to a marked increase in UK exports," ONS statistician Hannah Finselbach said.

Currency falls often take time to boost a country's trade position as imports rise in cost before businesses can find new markets for exports. Businesses surveyed by the Confederation of British Industry and IHS Markit (Stuttgart: A1139A - news) have reported big rises in costs but also greater demand for exports.

In the three months to October, goods import volumes were up 4.4 percent - the biggest rise since April - while goods exports were down 2.1 percent after a 5.1 percent drop in the third quarter.

October was lacklustre for construction, with output down 0.6 percent, reflecting lower infrastructure spending.

Construction orders were weaker than before the referendum, which the ONS said was due to fewer projects such as schools and hospitals. Last month finance minister Philip Hammond said he wanted to see more public investment.

Private house building proved a bright spot, with output up 2.4 percent on the month, the most since February.

"Although it may appear disappointing that infrastructure output did not mirror this trend, (Hammond's measures) should help ensure all future communities are supported by the right infrastructure," said John Tutte, chief executive of house builder Redrow (LSE: RDW.L - news) . ($1 = 0.7937 pounds) (Editing by Hugh Lawson)