The weakness of the euro is making life very difficult for a lot of our manufacturers to sell what they make in the eurozone

Patricia Hewitt Trade Secretary

The UK's trade deficit with the other 14 European Union member states, including the 12 eurozone countries, rose to a 30-month high of �762m in November, the Office for National Statistics said.

UK exports to the EU slumped to their lowest level since February 2000.

The UK's global trade deficit widened to �2.8bn, up from �2.4bn in October, and ahead of the �2.6bn forecast by economists.

Euro push

Ms Hewitt told the Times newspaper that there were "real potential benefits" of joining the single currency, arguing that British exporters were struggling to export profitably into the eurozone.

Her words followed an appeal from former Conservative deputy prime minister Michael Heseltine for the government to give a stronger lead in arguing the case for the euro.

A new network of pro-euro Labour MPs has just been created to push for UK membership of the single currency.

Clear message

But Labour's divisions over the issue were underlined when a group of 30 backbenchers on Monday pressed ministers to ignore the "costly distraction" of the euro and concentrate on "real priorities".

Hewitt says manufacturing should not be written off

Ms Hewitt said the five economic tests for euro entry must be met, but added that the "views of inward investors, certainly from Japan and Asia, are very clear".

"I've made it very clear that there are real potential benefits of membership of the euro, particularly for manufacturing industry in terms of things like currency stability, transparency of costs and simplification of the trading regime," she said.

Inward investors from Japan were worried about the euro and the exchange rate with the pound, the trade secretary said.

"There is no doubt at all that the weakness of the euro is making life very difficult for a lot of our manufacturers to sell what they make in the eurozone.

"There does have to be something wrong when some of the most productive plants in the world are struggling to export profitably into the eurozone.

"It suggests there is something fundamentally wrong in the current euro/pound exchange rate."

While the UK was "holding its own" in inward investment, much of that success was down to decisions made three or four years ago, Ms Hewitt suggested.

'Stop messing about'

Her remarks will be seen as part of an attempt to prepare the way for a possible euro referendum now euro notes and coins are being used in 12 countries.

They prompted a fresh attack from shadow chancellor Michael Howard, who accused the government of being at "sixes and sevens" on the issue.

"Labour should stop playing games on the euro and make up their minds," Mr Howard said.

If ministers wanted euro entry, they should get on with holding a referendum.

If not, they should "stop messing about and concentrate on the crisis in our public services", he said.

There was no evidence inward investment was being damaged at all by the UK being outside the eurozone, Mr Howard added.

Key speech

Despite her comments about the problems for exporters, Ms Hewitt is expected to sound a positive note about the state of British industry in a speech in the City later on Wednesday.

While UK manufacturing does have difficulties, it should not be "written off", she will say.