LONDON (Reuters) — Britain’s goods trade deficit with the rest of the world widened more than expected in November and the gap with countries outside the European Union hit a record high, official data showed yesterday.Sterling fell against the dollar and euro after the data which economists said showed the recent strength of the pound was harming demand for British goods abroad.

“This implies the real sterling exchange rate around record highs is starting to take its toll on the UK economy,” said Karen Ward, an economist at HSBC.

Ward noted that the Bank of England had expected exports to pick up late last year. But she said: “Going forward we expect ... export volumes to suffer. The rebalancing towards net exports which the Bank of England was expecting is unlikely to have materialised.”

The Office for National Statistics said Britain’s goods trade gap grew to $7.193 billion from a revised $6.601 billion in October as growth in imports outstripped exports. Economists had forecast a deficit of $6.48 billion.

The goods trade gap with non-EU countries hit an all-time high of $4.631 billion, from $3.952 billion in October. Analysts had forecast a deficit of $3.95 billion.

Driving the record non-EU trade gap were falling exports — down 0.5 percent — and rising imports — up 5.5 percent.

“These numbers mean trade may have been more of a drag on Q4 GDP than we thought, but this is likely to be offset by stronger than expected consumption,” said Peter Newland, an economist at Lehman Brothers.

Policymakers are likely to treat the data with some caution as Britain’s trade figures are heavily distorted by the effects of VAT fraud.

However, the ONS said the trade associated with so-called carousel fraud had fallen to just $200 million in November, well below the $5.4 billion peak in March.