Government borrowing hits £272bn

THE Government borrowed £32billion from debt markets last month, six times more than it did last year due to the pandemic, the Office for National Statistics (ONS) will say this week.

On Friday the ONS is expected to say that the Government issued £32billion of bonds, or IOUS, to debt investors, taking public sector net borrowing for the 2020/21 financial year to £272.9billion.

That compares to just £63.1billion for the same period during the previous financial year.

The Government has been forced to borrow heavily as the coronavirus has brought whole industries to a halt and severely curtailed economic activity. The Office for Budget Responsibility estimates the deficit, the gap between official spending and revenues, will be £394billion due to coronavirus. However economists fear it will rise even higher.

“Borrowing is likely to remain high for the next few months as January’s third Covid-19 lockdown keeps many businesses closed,” said Capital Economics senior UK economist Ruth Gregory. “Overall, we expect the deficit to reach £420billion in 2020/21, well above the OBR’S projection.”

On Friday, early results from the Markit/cips purchasing managers indices are likely to show further deterioration in the economy.

The PMI flash number for the services sector is expected to come in at 45.3, it was 49.4 in December. A score above 50 indicates growth, a score below points to contraction. Manufacturing’s score is thought to have fallen from 57.5 to 53.