Sterling nears post-EU referendum low as trade deficit widens

The pound has slipped close to its lowest level against the US dollar since June's Brexit vote, after official figures showed a worse than expected widening of the UK trade deficit.

Sterling fell by more than half a cent against the greenback to below $1.21 for the first time in more than two months before recovering slightly.

It came after the Office for National Statistics (ONS) said the goods trade deficit - the gap between imports and exports - widened to a worse-than-expected £12.2bn in November.

The British Chambers of Commerce said the figures confirmed that "there is little evidence that the fall in the value of the pound is boosting the UK's overall trade balance".

Exports are lifted by the fall in the pound, which makes goods cheaper for overseas customers.

The latest figures showed goods exports reached a record high of £27bn, but that imports also shot up to £39.2bn.

The total trade deficit, including services as well as goods, widened by £2.6bn to £4.2bn.

Separate data from the ONS was more positive, showing better-than-expected 1.3% growth in the manufacturing sector.

But there was a 0.2% decline in construction thanks to a fall in non-residential repair and maintenance, though house building continued to grow.

Senior ONS statistician Kate Davies said the figures painted "a mixed picture of the UK's economic performance".

The pound has fallen by 19% since the Brexit vote last June, which sent it to lows last seen in 1985.

A so-called "flash crash" - seen as a trading blip - saw it collapse to nearly $1.14 in October.

But excluding this, it reached a post-referendum low of 1.2081 on 25 October, before making up some ground on speculation about the nature of the divorce from the EU.

There was a sharp dip earlier this week after comments by Theresa May in a Sky News interview suggesting Britain was heading for a "hard Brexit" - excluded from accessing the single market.