London, March 30:

The UK suffered a record current account deficit last year as the highest-ever goods trade deficit, bigger payments to the European Union (EU) and insurance payouts to victims of Hurricane Katrina all took their toll, official data showed yesterday.

The UK’s Office for National Statistics reported a balance of payments shortfall of 32 billion pounds for the full year, with the fourth quarter’s 11 billion pounds deficit matching the record set in the third quarter because of a sharp drop in the traditional surplus in investment income. The annual deficit was up from 24 billion pounds in 2004.

As a share of national income, however, the deficit was not a record. That honour belongs to 1989, when the deficit reached a record of 5.1 per cent of gross domestic product — double last year’s 2.6 per cent. The 2005 figure was the worst for five years, however.

Last year’s goods trade deficit, which the ONS has already reported, accounted for 5 billion pounds of the 9 billion pounds deterioration in the current account position. The traditional surplus in services trade shrank by 2.7 billion pounds last year to 18.7 billion pounds, mainly due to a 2 billion pounds outflow of payments from British insurance companies to cover losses in the US from Hurricane Katrina. And payments by Britain into the EU rose by nearly 1 billion pounds last year to 5.4 billion pounds because of the addition of 10 new countries in 2004.

Economists were alarmed by the fourth-quarter deficit figure of 11 billion pounds, which was several billion worse than they had expected and put the quarterly deficit at 3.6 per cent of GDP, the joint worst since the early 1990s and one which, along with other weak economic data, pushed the pound down on the foreign exchanges.

It fell half a percent against the dollar.

The ONS said the main reason was a sharp drop in the surplus of British companies’ returns on their investments abroad minus the outflows on investments that foreigners have in this country. That surplus dropped to a four-year low of 3.7 billion pounds, largely due to big dealing profits made by foreign-owned banks in London flowing out of Britain.