Current account gap hits record high

LONDON (Reuters) - The current account deficit hit a record high of 20 billion pounds in the third quarter, equivalent to 5.7 percent of gross domestic product, official data showed on Thursday.

The Office for National Statistics also reported that quarterly GDP growth in the third quarter of 2007 was unrevised at 0.7 percent but the annual rate was marked a tenth of a point higher to 3.3 percent because of changes to 2006 data.

Public sector net borrowing, meanwhile, hit a record high of 11.208 billion pounds in November as government expenditure outstripped receipts, putting pressure on Chancellor Alistair Darling's bid to achieve his full-year forecast.

The cash measure, PSNCR, stood at 8.937 billion pounds, around 1.5 billion higher than a year earlier.

The huge rise in the Q3 current account deficit is likely to put further pressure on sterling in the medium-term and is a result of a big rise in the deficit on income as well as trade in goods.

"This morning's flurry of UK data paints a worrying picture of a dangerously unbalanced economy...The UK's external position now looks pretty much as bad as that in the U.S., suggesting the pound needs to fall sharply like the U.S. dollar," said Jonathan Loynes of Capital Economics.

The GDP breakdown, meanwhile, revealed consumer expenditure rose by 1.1 percent in Q3, the fastest rate since Q2 2006. The savings ratio fell to 3.4 percent from 4.0 percent.

But policymakers are much more worried about risks to growth further ahead as the turmoil in financial markets drags on and is expected to tighten credit conditions.

"Overall, a pretty ugly picture, supporting our view that the coming economic slowdown will be a prolonged period of adjustment rather than a short pause for breath like that seen in 2005," said Loynes.