For the first four months of the current financial year, UK government has borrowed £44.9bn, £9.3bn more than over the same time last year.
During July, public sector borrowing was £600m, higher by £3.4bn from July last year when a £2.8bn repayment was made. At the end of the month, public sector debt was just over £1trn or 65.7% of GDP.
July is traditionally a good month for the tax office coffers so the fact that the Government had to borrow money is a surprise, especially to those analysts who expected a surplus of more than £2bn between payments and receipts.
Some economists, including George Buckley, UK chief economist at Deutsche Bank, do not see this as a one-off.
He commented: “The combination of a decline in corporation tax receipts and at the same time a sharper rise in government spending led to a budget deficit in a month traditionally associated with budget surpluses.
“While we should beware of any one month’s figure, it is worth noting that growth in tax receipts has been falling for some time now, while spending growth has been recovering for a number of months. Further economic weakness – as highlighted by today’s CBI survey – suggests that the trend towards higher deficits could continue.”
The CBI’s survey of UK manufacturers this month showed a deterioration in their existing order books, with 36% saying they are below normal. At the same time export manufacturers reporting a balance of -17%, the lowest figure reported since -26% in January.
Anna Leach, CBI head of economic analysis, said: “Overall demand for manufactured goods has eased back this month, led by a weakening in the consumer goods sector following a strong July figure. This sector also contributed to the weakening in output expectations for the next three months, alongside investment goods.
“The economic environment for UK manufacturers remains challenging, with domestic demand relatively muted and the ongoing Eurozone crisis now seeming to drag on broader global economic momentum.”
