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