WORSE than expected figures for Britain’s balance of payments in February prompted warnings yesterday that the country’s trade performance would again drag down growth in the first quarter.

The global trade gap on goods and services widened to a deficit of £4.8 billion in February from £4.6 billion the previous month, the Office for National Statistics (ONS) said. It was the biggest such deficit since August. The deficit on goods excluding oil and erratic items widened to a record £6.3 billion from £5.7 billion.

The pound briefly faltered against the dollar as speculators bet that the figures strengthened the chances that weak growth would force the Bank of England to cut interest rates later in the year.

Analysts calculated that the wider than expected deficit in February made it likely that net trade would subtract from real GDP growth in the first quarter — a disappointment after the fourth quarter of 2005, in which net trade boosted the performance of the economy.

Jonathan Loynes, of Capital Economics, said: “With household spending also likely to have grown more slowly than in (the fourth quarter), hopes of an above-trend rise in GDP of 0.7 per cent or 0.8 per cent in (the first quarter) now look very unlikely to be met.”

In a sign of the impact that Chinese imports have on Britain’s economy, the goods trade gap with China widened to £1.06 billion, the first time that it has topped £1 billion. Chinese exports to Britain totalled £1.28 billion in February, compared with imports of £218 million.

Figures for January were heavily revised to show a trade gap of £4.6 billion, up from an earlier estimate of £3.8 billion. The ONS repeated its previous concerns that missing-trader fraud, a widespread VAT scam involving international trade, was distorting the figures.

The official data showed £317 million of exports and £242 million of imports of capital goods, much of which was likely to be mobile phones and computer chips traded purely for fraudulent purposes, an ONS statistician said.

EU BOOST

World trade will benefit from strengthening economic growth this year, particularly in the European Union, the World Trade Organisation (WTO) said yesterday (Gabriel Rozenberg writes). The WTO forecast that global trade would grow by 7 per cent, up from 6 per cent last year, as world GDP expands by 3.5 per cent, against last year’s 3.3 per cent rate.

However, in its annual review of trade trends, the WTO said that faltering US growth or a lack of momentum in the EU recovery could make the forecast over-optimistic.

Pascal Lamy, the WTO Director-General, said that member governments “must strengthen the global trading system by making it more equitable and relevant”.

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