By Marcus Leach

An increase in oil exports to the European Union has seen the UK's trade deficit narrow in July, according to official statistics.

The deficit in July totalled £1.5bn, compared with £4.3bn in June, the Office for National Statistics data showed.

Exports of goods rose 9% to £25.8bn, while imports shed 2.1% to £32.9bn. For services, exports fell 0.9% to £15.6bn, while imports declined 0.4% to £10bn.

"The surge in exports will have taken many by surprise - not least the nearly 8% jump in sales to the EU," Jason Conibear, Trading Director at the forex specialists Cambridge Mercantile, said.

"With the Eurozone crisis put on hold during much of the summer holiday period, our European neighbours bought more British goods during July.

"Last week European equity markets spiked after Mario Draghi drew a line in the sand. For now that confidence is holding - and the Eurozone, our largest trading partner, is in a less parlous state than it has been for some time.

"Exports to non-EU countries leapt by 11% in July, as the Pound's relative weakness made British goods competitive in several key markets.

"But the improving trade deficit cannot be attributed solely to a tubthumping boost in British exports. Weak demand here saw imports of non-EU goods drop by more than 5%.

"Sterling's trade-weighted index has fallen by a fifth since 2007, so the exchange rate is clearly helping nudge the deficit in the right direction.

"But anaemic demand at home and a modest uptick in demand for British goods across the Channel are not enough to set the corks popping on the English sparkling wine just yet."

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