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Last Updated: Wednesday, 9 July, 2003, 10:01 GMT 11:01 UK
Rising imports widen UK trade gap
The weaker pound has not helped exporters
The UK's trade deficit unexpectedly worsened in May as the economy sucked in more imports, official figures have shown.

The trade gap rose to �4.1bn ($6.7bn) in May, compared with an upwardly-revised �3.37bn deficit in April.

The deficit was worse than expected, and came after global goods exports dropped 1.4% to �15.2bn while imports rose 3% to �19.3bn.

The Office for National Statistics (ONS) also announced large upward revisions to imports from the EU for the past four years as a result of a value-added tax (VAT) fraud.

'Bad numbers'

Earlier this year the value of the pound fell against the euro, which should have made UK exports cheaper and thus helped companies looking to sell their goods abroad.

It seems that weakness in eurozone growth is continuing to limit the trade performance of the UK
Adam Chester, Halifax
However, economists said the sluggish performance of the eurozone economy was proving a bigger problem.

"These are bad numbers. Sterling weakness during that period obviously had had little material impact in improving trade performance," said Adam Chester, economist at Halifax bank.

"It seems that weakness in eurozone growth is continuing to limit the trade performance of the UK."

The UK's trade deficit with the EU rose to �2bn in May - the highest level since last November.

VAT fraud

The ONS said it was making major changes to historic data to take account of imports which had missed VAT payments.

The goods involved in the scam were mainly mobile phones and parts for computers.

Upward revisions to imports amounted to �1.7bn in 1999, �2.8bn in 2000, �7.1bn in 2001 and �11.1bn last year.

The ONS said the changes would have the effect of cutting GDP in 2000 and 2001 by between zero and 0.2%, but added that other revisions being made were expected to offset these alterations leaving GDP broadly unchanged overall.




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