UK Government Borrowing Exceeds Estimate

The UK government borrowing exceeded the official estimate and the debt hit 100 percent of GDP at the end of August, data from the Office for National Statistics revealed Friday.

Public sector net borrowing increased GBP 3.3 billion from the previous year to GBP 13.7 billion in August. This was the third highest borrowing for August since 1993.

Borrowing was GBP 2.5 billion higher than the GBP 11.2 billion forecast by the Office for Budget Responsibility. Economists had forecast borrowing to rise to GBP 12.1 billion.

The total borrowing for the financial year to August also stayed above the official estimate. Borrowing increased GBP 0.3 billion from last year to GBP 64.1 billion, compared to the OBR forecast of GBP 57.8 billion.

The increase largely reflects the rise in central government departmental spending on goods and services due to rising inflation.

At the end of August, public sector net debt excluding public sector banks was estimated at 100.0 percent of gross domestic product. This was 4.3 percentage points more than at the end of August last year.

While today’s release highlights the tight fiscal backdrop that the Chancellor faces ahead of her first Budget on October 30, it may not all be bad news, Capital Economics’ economist Alex Kerr said.

The economist noted that an improvement in the economic backdrop since March and the rolling on of the five year ahead fiscal rule means the OBR may hand the Chancellor more headroom than the GBP 8.9 billion at the Budget in March, perhaps around GBP 22 billion.

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