UK bor­row­ing will soar to £385bn in just eight months

The Daily Telegraph - Business - - Business - Russell Lynch By

THE UK will bor­row an ex­tra £110bn from debt mar­kets to pay for the Covid-19 cri­sis, tak­ing the to­tal to a mam­moth £385bn in just eight months.

The Debt Man­age­ment Of­fice an­nounced plans to sell the gilts be­tween Septem­ber and Novem­ber, days af­ter the Chan­cel­lor un­veiled an ex­tra £30bn to sup­port an econ­omy mired in its deep­est re­ces­sion for 300 years.

The Trea­sury said the record gilt sales “are not ex­pected to per­sist over the fi­nal four months of the year”. But the head of the DMO, Sir Robert Sthee­man, said the UK’s fund­ing needs were sub­ject to the huge un­cer­tainty over the path of the pan­demic.

He told Bloomberg: “To try and an­tic­i­pate such ex­ter­nal de­vel­op­ments – whether there’s a quick recovery, or sec­ond wave or what­ever it is – is ex­tremely dif­fi­cult. I can’t pre­dict mar­kets, how am I go­ing to pre­dict what’s go­ing to hap­pen with a sec­ond wave?”

The Of­fice for Bud­get Re­spon­si­bil­ity pre­dicts a deficit of £322bn this year – around 15pc of GDP – but the Gov­ern­ment’s fi­nanc­ing needs are much higher as it also has to roll over ex­ist­ing debt as well as rais­ing record amounts of new bor­row­ing.

The OBR’s lat­est re­port on the pub­lic fi­nances said the gross fi­nanc­ing re­quire­ment for the full fi­nan­cial year could be as high as £521bn.

The Bank of Eng­land has kept the Gov­ern­ment’s bor­row­ing costs close to record lows thanks to in­ter­est rates at 0.1pc and the ex­pan­sion of its bond­buy­ing pro­gramme by £300bn.

The stim­u­lus has prompted claims the cen­tral bank is ef­fec­tively fi­nanc­ing the deficit, al­though Gov­er­nor An­drew Bailey warned in June that the Bank’s in­ter­ven­tions “can’t be taken for granted”. The Bank slowed the pace of its as­set pur­chases at its lat­est pol­icy meet­ing last month.

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