Pound falls as exports hit by weather and ash cloud

The pound fell against major currencies on news that the UK trade deficit widened to £9.7bn in the last quarter - the worst result since the collapse of Lehman Brothers in 2008. The pound was down three cents against the dollar in the past 24 hours, while against the euro it fell one cent.

The monthly trade gap, which saw the difference between exports and imports worsen from £2.2bn in February to £3.7bn in March, looks more serious than it probably is, because some exports would have been shifted from January to February thanks to the severe winter weather. This in turn makes the comparisons with March look worse. But it is impossible to ignore that terrible quarterly figure.

The Governor of the Bank of England, Mervyn King, said on Wednesday that future economic growth in Britain would have to come from exports rather than domestic demand - a view that seems like wishful thinking in the wake of the latest figures.

Ross Walker of RBS told the BBC: "These are disappointing numbers. I'm sceptical we're going to see any significant contribution to [UK] growth this year from net trade."

Currency speculators clearly see the trade deficit as evidence that Britain cannot necessarily expect to escape the recession over the strength of its exports - despite the weak pound.  

Short-term prospects also look poor, with the eurozone sovereign debt crisis and the civil unrest and strikes that go with it, plus on-going flight delays caused by the volcanic ash cloud all conspiring against British exporters. ·