Record UK current account deficit of £10.2bn

The third quarter of 2005 saw the UK's current account deficit soar to a record high of £10.2bn ($17.7bn).

The Office for National Statistics(ONS) said the deficit is the biggest since records began in 1955.

The main reasons for the deterioration were the Katrina-related insurance claims and increased oil imports.

The deficit is equivalent to 3.4% of the UK's GDP, the highest level since the fourth quarter of 2004.

The insurance costs related to Katrina helped reduce the UK's usual surplus in services trade by £2.1bn compared to the second quarter of 2005.

Foreign-owned firms also removed huge profits, made on the back of soaring oil prices, from the UK during the third quarter.

News of the record deficit helped push the pound to a two-week low against the dollar in the currency markets.

Analysts expect the deficit to narrow sharply early next year because oil prices have retreated and the insurance losses from Hurricane Katrina are one-offs.

But the figures were still worrying, according to Philip Shaw, an economist at Investec.

"The current account deficit was very disappointing, we'd known about the insurance payouts on the back of Hurricane Katrina, but what we hadn't factored in was the greater outflow due to overseas earnings from the UK."

The ONS also said its estimated GDP growth rate for the UK economy in the third quarter of 2005 would be left unchanged at 0.4%