The UK's trade deficit reached a record £20bn between July and September, new figures show.

The increase is being blamed on the strength of the pound, which boosted imports, and a fall in overseas investment following the credit crunch.

The total deficit reached almost 6% of the UK's gross domestic product in the third quarter, according to the Office for National Statistics - much more than the £11.4bn amount forecast by analysts.

Capital Economics economist Jonathan Loynes said the figures show the economy is "dangerously unbalanced", while Investec expert Philip Shaw called the situation "unsustainable".

Mr Shaw said: "If the figures are correct it means the current account position is much more serious than we thought previously.

"The UK can live with a deficit of around 2% of GDP but 5.7% is a totally different order of magnitude. It means that the UK is spending much more than it is earning and the position is not sustainable."

The deficit is a major jump on the £13.7bn recorded in the second-quarter, and is likely to mean a significant fall in the value of the pound as interest rates drop further next year.

It comes after the UK's trade gap in goods widened by £3.1bn, and investment income from overseas dropped by £3.6bn.

CEBR economist Charles Davis said: "This was due to banks withdrawing funds as the sub-prime fallout continues."

Chancellor Alistair Darling is also under further pressure as the data shows net borrowing reached £11.2bn last month - a record for November.

This brings net borrowing in the last eight months to £36.2bn, meaning Mr Darling will almost certainly exceed the public sector net borrowing forecast of £38bn for the current financial year.

Global Insight chief economist Howard Archer, who is forecasting growth of 1.9% next year compared with 3.1% this year, said: "Significantly slowing growth seems certain to increasingly undermine VAT and corporate tax receipts over the coming months, while a markedly softening housing market and lower City bonuses will also hit tax revenues.

"Mr Darling looks likely to have some difficult decisions to make when he delivers the 2008-09 budget."

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