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Britain’s trade deficit widens but firms are benefiting from the weak pound

DISRUPTION from the volcanic ash cloud and weakness in the Eurozone widened Britain’s gaping trade deficit in April, official figures from the Office for National Statistics (ONS) indicated yesterday.

The trade deficit in goods and services widened to £3.3bn from £3.2bn in March, as a result of a fall in the services surplus to £4bn from £4.1bn the previous month. The goods trade deficit remained broadly unchanged at £7.3bn.

The ONS said disruption to air travel caused by the volcanic ash cloud would have had an impact on both exports and imports to non-EU destinations. However, the impact on trade with EU countries is assumed to be negligible since a relatively low proportion of that trade is carried by air.

However, there were some encouraging signs. The jump in imports of basic materials and semi-finished manufactures shows that the manufacturing sector is recovering, said Alan Clarke at BNP Paribas.

There were also signs that the weak pound is starting to be felt although analysts noted that this was being used to bolster profit margins rather than make foreign currency prices more competitive.