In December, UK government borrowing surged to £17.8 billion, surpassing forecasts due to increased public spending driven by higher wages, inflation-linked benefits, and a notable property purchase. This represents the highest borrowing level for December in four years, significantly above November's £11.8 billion. Despite this, market reactions were muted, with minor gains in stock indices and stable currency values. Analysts warn that the overshoot could constrain Chancellor Rachel Reeves, who emphasized fiscal rules aimed at balancing government expenses with revenues.
"Against a backdrop of slowing GDP growth and high interest rates, December's overshoot in borrowing is further disappointing news for the chancellor," said Alex Kerr, UK economist at Capital Economics.
"These figures are the highest for that month since 2020, highlighting the ongoing pressure on public finances, particularly due to rising wages and inflation-driven costs."
"The latest borrowing overshoot is likely to constrain the chancellor, Rachel Reeves, who reaffirmed her fiscal rules as a 'bedrock' for economic stability."
"Strong gilt yields would reduce Reeves's flexibility, suggesting that balancing fiscal spending and receipts will become increasingly difficult amidst a weakening economy."
Collection
[
|
...
]