Hopes of surplus dashed

Hopes for a balance of payments surplus this year were dashed yesterday by lower invisible earnings. The figures, partly due to Barings' losses in Singapore, kept Britain's current account in the red by pounds 397m in the first quarter of this year.

There were also substantial downward revisions to last year's invisibles surplus, turning what was first thought to be a tiny current account deficit into a pounds 1.7bn shortfall.

A Treasury spokesman said that this was still near balance, and much lower than the pounds 11bn deficit in 1993.

''Deficits are likely to remain the norm in coming quarters,'' said Martin Brookes, an economist at Goldman Sachs. David Hillier at NatWest Markets said the invisibles balance could fall further, while the improvement in visible trade was also slowing.

The figures also revealed the full extent of overseas investors' stampede out of sterling during the first three months this year. Foreigners disinvested from British government stocks to the tune of pounds 3.9bn. Gilts, foreign currency stocks and overseas authorities' holdings in their currency reserves all fell sharply.

Their purchases of UK shares fell by more than pounds 500m to the lowest level since mid-1991, while purchases of corporate bonds fell by pounds 1.8bn.

Neil MacKinnon, chief economist at Citibank in London, said: ''The figures show how much investors have been staying clear of UK assets. Those still holding them would like to sell.''

Earnings from financial and other services dipped slightly. Investment earnings nearly halved, however. An estimate of Barings' losses overseas was one reason for this sharp fall, reducing the income from UK direct investment abroad.

Dutch bank ING's refinancing of Barings did contribute to a big increase in the level of direct investment in the UK in the first quarter. Direct investment was up from pounds 583m in the final quarter of 1994 to pounds 3.0bn.

The bigger revisions to services and investment income in 1994 and earlier years were due to improvements by government statisticians. These included new figures for net earnings from aviation and tourism, improved methods of collecting data on insurance and banking, late information and changes to seasonal adjustments. The Central Statistical Office's comment was: ''These are very large and volatile numbers.''