As the political crisis in the United Kingdom deepens following the unceremonious resignation of Prime Minister Liz Truss, the country’s economy is experiencing unfamiliar tests. Borrowing has risen sharply in the recent weeks while the retail sales have plummeted. The pound has continued to sink against the US dollar.
Latest data indicates that public sector net borrowing rose to 20 billion pounds ($22bn), the second-largest September level on record, as decades-high inflation sees interest on debt repayments increase drastically.
The data was released one day after Truss resigned in the face of markets turmoil instigated by her unpopular budget of tax cuts funded by debt.
Equally, retail sales volumes reduced by 1.4 per cent, a decrease of 0.3 per cent in August, as astronomical prices affected consumer purchasing.
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The public borrowing figure exceeded analysts’ consensus of 17.2 billion pounds ($18.9bn), which was already far above the government’s own prediction.
According to the data, public borrowing figure exceeded analysts’ consensus of 17.2 billion pounds ($18.9bn), which was already far above the government’s own prediction.
“The weakness in retail sales and further overshoot of the government public borrowing forecast won’t make the next prime minister’s task any easier in navigating the economy through” various crises, concluded Ruth Gregory, senior UK economist at Capital Economics.
There is growing fear among investors that the rising global interest rates could plunge the world economy into recession.
As CEBR economist Pushpin Singh noted, interest payments on government debt rose to 7.7 billion pounds ($8.4bn) in September, largely reflecting the broader economic environment of soaring inflation. Government borrowing in the UK is linked to the wider RPI measure of inflation, which stands at a huge 12.6 per cent.
Statistics seen by The Kenya Times indicate that the pound sterling slid by 1 per cent against the US dollar, before recovering slightly, while the yield on the British government’s 30-year bond climbed back above 4 per cent.