The shortfall on trade in goods was just under £7.6bn - down from just over £7.9bn in November but more than the widely expected figure of £7.35bn.

The UK's total deficit on goods and services for all of 2007 rose to £51bn.

Official data also showed a 16-year high for factory gate inflation with the price of goods rising 1% in January, pushing the annual rate up more than expected to 5.7% from 5%. The increase was largely driven by sharp rises in crude oil prices and the cost of ingredients for home-produced food.

Overall, input costs such as raw materials and energy shot up by 18.9% on the year.

The figures are likely to be a concern for the Bank of England and may indicate that interest rates will not come down as fast as many industry groups and homeowners would have hoped despite signs that the economy is set to slow markedly.

Howard Archer, economist at Global Insight, said this latest set of worrying economic news would "cause severe headaches at the Bank of England".

The Bank eased borrowing costs by a quarter-point last week to 5.25%, however it has been much more cautious than the US Federal Reserve, which has aggressively cut interest rates.

Paul Dales, analyst at Capital Economics, said: "This morning's UK producer prices and trade data will deepen the inflation worries that are preventing the Monetary Policy Committee from cutting interest rates sharply.

The deficit with the Euro Zone was £3.5bn, the same as in November. However, the deficit with non-EU countries narrowed to £4.1bn compared with the deficit of £4.4bn in November.