Britain’s current account deficit hits $37.21bn

Bags of cane sugar move along a conveyor belt at Tate & Lyle Sugars refinery in London. The Office for National Statistics yesterday confirmed the Britain’s economy grew 0.7% in October-December last year compared with the previous quarter.

Reuters/London

Britain’s current account deficit was much bigger than expected in the fourth quarter and households ran down savings to keep up their spending, reminders of the need to put the economy on a more balanced footing to maintain growth.

The current account deficit in the October-December period was £22.4bn ($37.21bn), or 5.4% of gross domestic product, down only slightly from a record of 5.6 in the third quarter, official data showed. A Reuters poll had predicted a deficit of £14bn.

Britain’s economy staged a surprisingly fast rebound last year and looks to have started 2014 with the same kind of momentum. But the recovery has yet to broaden significantly beyond its reliance on unsustainable domestic demand.

The Office for National Statistics confirmed the economy grew 0.7% in October-December last year compared with the previous quarter and was 2.7% bigger than in the fourth quarter of 2012. Economists had expected no change to previous ONS estimates. The current account shortfall was driven largely by an increase in foreign investment earnings leaving the country and a drop in income on British investments abroad, heightened by a rise in sterling, the ONS said.

For 2013 as a whole, the current account deficit stood at 4.4% of GDP, the widest deficit since 1989.