Sarah O?Connor and John Reed

Britain?s trade deficit in cars is at its smallest since 1976 as the country?s automakers profit from buoyant overseas demand for their vehicles, unpublished official statistics show.

Car exports are surging and Britain?s niche premium producers, like Jaguar Land Rover, Bentley and Mini, are doing especially well selling expensive cars to overseas customers, including the newly rich in China and Brazil.

At the same time, car imports have been relatively weak for several years as Britons suffer the sharpest decline in real disposable incomes on record.

Registrations of new cars dropped by 4 per cent last year to 1.94m, and

industry forecasters expect that to shrink again this year.

Together, these two trends narrowed the trade deficit in passenger cars last year to its smallest level since 1976 in real terms, according to a Financial Times analysis of figures from the Office for National Statistics, using the gross domestic product deflator.

In 2007, the year before the collapse of Lehman Brothers, the deficit was almost seven times the size it was in 2011.

?The automotive sector has been a huge success story,? said Mike Steventon, a senior partner at KPMG?s Birmingham office, whose clients include many of the large carmakers.

Britain?s trade deficit as a whole has been shrinking since the recession

but at a slower pace than policymakers had hoped.

Manufacturers helped to power the economic recovery but many saw growth peter out towards the end of last year. Carmakers were one exception.

The UK exports about five in six of the cars it makes and imports the same proportion of cars sold on the local market.

Weaker sterling – the effective exchange rate depreciated by about 25 per cent between mid-2007 and early 2009 – has probably helped exports along. But the carmakers are also tapping the right markets.

Britain?s ?heritage? premium brands are reporting their strongest sales growth in emerging markets such as China, which are removed from the gloom gripping Europe.

Rolls-Royce, which is owned by BMW, sold a record 3,538 cars in 2011, 31 per cent more than in 2010. China and the US were its largest markets. Bentley, owned by Volkswagen, reported its best sales last year since 2007, selling more cars in China than the UK for the first time.

UK-based mass manufacturers are faring well too. Japan?s three carmakers – Toyota, Nissan and Honda – all

have some of their largest European plants in Britain and are expanding their operations.

Honda is adding 500 jobs at its plant in Swindon as part of a plan to reduce its yen exposure and double its production in Europe this year. Toyota is adding up to 1,500 jobs at its plant in Burnaston, Derbyshire, where it is concentrating its European production of midsize ?C? segment cars.

Lee Hopley, chief economist at EEF, the manufacturers? organisation, said carmakers were reaping the benefit of decisions made years ago to improve productivity. ?It?s an incredibly efficient industry we have here in the UK,? she said.

However, the industry is still much smaller than at its peak – production levels are still lower than before the recession. Production of cars and commercial vehicles peaked at 1.98m units in 1998 and 1.75m in 2007, and totalled 1.47m last year.

?Despite this recent bounce-back there?s still some way to go before the industry gets back to where it was a decade ago,? said David Bailey, an expert on the industry at Coventry University.

Paul Everitt, the Society of Motor Manufacturers and Traders chief executive, said an escalation of the crisis in the eurozone could burst the industry?s bubble. ?As strong as we are in terms of exporting to other markets . . . 60 per cent of what we export still goes to mainland Europe,? he said.

?So the success and stability of mainland Europe is crucial.?

Additional reporting by John Murray Brown