UK current account deficit widest in two years, businesses cut investment as Brexit nears

(Reuters) - Britain's balance of payments shortfall was its biggest in two years in the three months to September and business investment fell again ahead of Brexit, official data published on Friday showed.

The difference between money flowing in and out of Britain was negative to the tune of 26.5 billion pounds in the third quarter, bigger than a deficit of 20.0 billion pounds in the second quarter, the Office for National Statistics said.

It was bigger than all forecasts in a Reuters poll of economists which had pointed to a 21.2 billion-pound shortfall.

Bank of England Governor Mark Carney has previously warned that Britain's large current account deficit left it reliant on "the kindness of strangers."

 

That could be a risk as the country prepares to leave the European Union in March with no clarity yet on whether it can smooth its exit with a transition period.

The current account deficit was equivalent to 4.9 percent of the country's economic output, again the widest since the third quarter of 2016, up from 3.8 percent in the three months to June.

The shortfall was driven largely by higher profits from British companies flowing to foreign investors.

The ONS confirmed Britain's economy grew by 0.6 percent in the third quarter from the previous three months, the same as a preliminary reading and the fastest increase since the end of 2016.

However, more recent data has suggested the economy is slowing ahead of Brexit in March and as the global economy weakens.

"The longer-term picture remains subdued and business investment has now fallen for three consecutive quarters," ONS statistician Rob Kent-Smith said.

The last time businesses in Britain cut back on investment for three or more quarters in a row was during the depths of the financial crisis in 2009.

Kent-Smith also said households had spent more than they received for an unprecedented eighth quarter in a row, raising questions about their ability to keep on spending and driving the country's economy.

(Reporting by William Schomberg and David Milliken)