Goods trade deficit widened less than expected in January after touching its narrowest in two years at the end of 2011, official data showed on Tuesday, keeping hopes alive that the economy is rebalancing.
Total goods exports to non-EU countries rose to a record high, helped by car sales to the United States, Russia and China. Total oil exports also hit a record peak due to higher oil prices, though Britain's deficit in trade in oil widened.
The Office for National Statistics said the goods trade deficit grew to 7.532 billion pounds in January - versus forecasts for 7.88 billion pounds - from 7.184 billion pounds in December, which had been the lowest since December 2009.
The goods trade deficit with non-EU countries also widened to 3.678 billion pounds in January from 3.601 billion pounds in December and against forecasts for a gap of 4.25 billion pounds.
Overall goods imports rose faster than exports as Britain sucked in oil from Nigeria, Saudi Arabia and Russia as well as chemical products from Germany, the Netherlands and the United States.
The total trade deficit, which includes services, widened to 1.762 billion pounds from 1.217 billion pounds, after Britain's surplus in services fell.
The Bank of England and the finance ministry are hoping that Britain's economic recovery this year will be driven by exports growth, as consumer spending is under pressure from s low wage rises, high inflation and the government's austerity programme.
However, a debt crisis in countries on the euro zone's periphery casts doubt on how easy this would be to achieve.
Recent economic data in Britain has been mixed, with a shock fall in industrial output in January contrasting with more upbeat news elsewhere and improving consumer sentiment.
According to the Organisation for Economic Co-operation and Development (OECD), the British economy is showing signs of improvement. The OECD's leading indicator, a measure that seeks to flag turning points in economic activity, entered positive territory for Britain in January.
Likewise, Britain's leading macroeconomic think-tank, the National Institute of Economic and Social Research, has estimated that the economy grew 0.1 percent in the three months through February, stabilising after a 0.2 percent decline in the three months to January.
However, policymakers worry that a sharp slowdown in Britain's main trading partner, the euro zone, could tip the country's fragile economy back into recession.
And rising oil prices make it harder for the Bank of England to support growth. The central bank's ability to inject further stimulus on top of the 50 billion pounds o f quantitative easing approved last month hinges on its confidence that inflation will fall back to its 2 percent target in the medium term.
(Reporting by Olesya Dmitracova and David Milliken)