US orders boom shrinks UK trade gap

BRITAIN'S trade gap narrowed at the end of last year as surging demand for exports in the US offset feeble demand in continental Europe.

A smaller-than-expected December trade in goods deficit of £4.2bn brought the 2003 full-year shortfall to £46.4bn, a whisker below 2002's £46.6bn, which was the widest since records began in 1697 when William of Orange was on the throne.

The gap with the European Union - Britain's biggest trading partner, accounting for almost 60% of total export business - hit a record £2.8bn in December as exports floundered and imports were sucked in. The gap with non-EU countries narrowed to £1.4bn, thanks mainly to a pick-up in exports to the US.

Economists said the contrast was a vivid illustration of how America's economy was recovering while that of the eurozone was still struggling.

'Relations with Europe are rather more cordial than in the late 17th century but must be being tested a little by the persistently-weak demand on the Continent,' said Ross Walker at Royal Bank of Scotland. The figures provided some reassurance that sterling's surge against the ailing dollar was not hitting Britain's competitiveness in American markets. 'Whatever other problems the US faces, weak consumer demand isn't the most pressing,' Walker said.

Sterling today powered to a fresh 11-month high against the dollar as dealers bet against central bank intervention to halt the greenback's decline. The pound hit a peak of $1.8696 while the euro climbed to a one-month high of $1.2788. US Treasury Secretary John Snow said last night the markets should set exchange rates.

LONDON'S economy started the year in great shape, with business booming and firms hiring new staff. Growth in business activity eased slightly but outstripped the national average for the seventh month running. The findings come in the Royal Bank of Scotland London poll, based on the CIPS/Reuters Purchasing Managers' Report. Its headline business activity index was 60.5 in January, down from December's 61.4 but well above the 50 'no change' level.