Britain's current account deficit widened to a record high at the end of last year, highlighting a weak spot in an economy coming under sharper focus ahead of a vote on whether to remain in the European Union.

Official data also released on Thursday showed the country’s economy grew slightly faster than previously thought in the fourth quarter, giving a boost to sterling. Meanwhile, a measure of consumer confidence remained stuck at its lowest level in more than a year, hurt by worries about the EU referendum and the euro zone’s persistent economic problems.

The deficit in the current account was the eye-catcher. It shot up to the equivalent to 7.0 per cent of gross domestic product from 4.3 per cent of GDP in the third quarter. It was more than expected. Finance minister George Osborne said the numbers underscored the importance of Britain voting to remain in the EU in the referendum on June 23.

“Today’s figures expose the real danger of economic uncertainty and shows that now is precisely not the time to put our economic security at risk by leaving the EU,” Osborne said. The value of sterling has weakened sharply since the start of year on concerns about the outcome of the EU referendum.

Bank of England Governor Mark Carney has said a vote to leave the bloc would test the "kindness of strangers" on whom Britain relies to cover its balance of payments shortfall. For 2015 as a whole, the current account deficit stood at 5.2 per cent of GDP, the biggest since records began in 1948, the Office for National Statistics said. The ONS figures showed a fall in income from British direct investments abroad while more money flowed out to foreign investors in Britain. The imbalance in flows has grown as Britain's economy expanded more strongly than many other countries over the past three years.

Stronger growth, household pressure

The ONS said that Britain’s economy grew 0.6 per cent in the fourth quarter compared with the previous three months, higher than a previous estimate of 0.5 per cent, helped by the country’s dominant services sector. GDP was 2.1 per cent bigger than in the fourth quarter of 2014, stronger growth than the previous estimate of 1.9 per cent.

Economists taking part in a Reuters poll had expected no change to the previous ONS estimates for gross domestic product. In 2015 as a whole, Britain’s economy grew by 2.3 per cent, higher than a previous estimate of 2.2 per cent. After two years of strong growth, Britain’s economy began to slow in late 2015 although it remains one of the leaders among the world’s rich countries. Consumer demand remains the main driver of growth and spending by households grew by 0.6 per cent in the fourth quarter, unchanged from the previous three months. BoE data showed growth in consumer lending over the 12 months to February was its strongest since 2005.

However, real household disposable income fell 0.6 per cent as rises in incomes failed to keep up with a pickup in prices and the ratio of savings fell to a record low, the ONS said.

Reuters