UK borrowing exceeds forecasts, debt highest since 1960

Huge cost of coronavirus pandemic drive borrowing surge

Photograph: iStock

Britain’s government borrowing exceeded forecasts in September and over the first half of the financial year was more than six times higher than a year earlier, due to the huge cost of the coronavirus pandemic, official data showed on Wednesday.

Public sector net borrowing totalled £36.101 billion (€39.5 billion) last month, above the £33.550 billion forecast in a Reuters poll, although August’s figure was revised down by more than £5 billion to £30.113 billion.

Separately, the Office for National Statistics said annual consumer price inflation in September rose to 0.5 per cent in September from 0.2 per cent in August, when it had been reduced by a temporary scheme to promote dining in restaurants.

Economists polled by Reuters had on average predicted a rise in inflation to 0.5 per cent.


British public borrowing is on course to reach a record £372 billion this financial year, according to forecasts in August from the Office for Budget Responsibility, equivalent to 18.9 per cent of gross domestic product, the most since World War Two.

Driven by a surge in coronavirus-related spending and a fall in tax revenue after the biggest economic hit since at least the 1920s, borrowing in the first half of the financial year totalled £208.5 billion.

Wednesday’s figures also showed that public debt rose further above the 2 trillion pound mark to £2.060 trillion or 103.5 per cent of GDP, its highest on this measure since 1960.

Ratings agency Moody’s downgraded Britain’s sovereign credit rating on Friday to the same level as Belgium’s and the Czech Republic’s, warning that Britain “effectively has no fiscal anchor”.

Financial markets have repeatedly shrugged off these warnings, though, and 10-year government borrowing costs of around 0.2 per cent are only slightly above an all-time low struck at the start of the pandemic.

Economists polled by Reuters expect the Bank of England to launch a further £100 billion of bond purchases next month, adding to the £300 billion announced since March.

Earlier this month finance minister Rishi Sunak said rapidly rising debt made the country more vulnerable to any future spike in interest rates, but has said fiscal retrenchment, but that for now his priority needed to be on supporting the economy. – Reuters