Britain Budget Deficit Surges in December

Britain Budget Deficit Surges in December

Public Sector Borrowing Exceeds Expectations

In December, Britain’s public sector net borrowing reached £17.8 billion, significantly higher than the £14.1 billion forecasted by economists and over £10 billion more than the same period a year earlier. The increase was driven by rising debt interest costs and a one-off payment of £1.7 billion for the purchase of military housing.

Debt Interest Costs Hit Record Highs

The government faced an £8.3 billion debt interest bill in December, the third-highest December total on record. This rise contributed heavily to the swelling budget deficit.

Rising Borrowing Amid Fiscal Challenges

Over the first nine months of the 2024/25 financial year, Britain has borrowed £129.9 billion, exceeding the forecasted £125.9 billion. Public sector net financial liabilities also rose, reaching 84.5% of GDP in December, up from 84.0% in November.

Chancellor Faces Mounting Pressure

Chancellor Rachel Reeves, who introduced higher taxes and borrowing in her October budget, faces mounting fiscal challenges. Economic slowdown and high interest rates are complicating efforts to meet fiscal rules, which include balancing day-to-day spending by the end of the decade and reducing net financial liabilities as a share of GDP.

Analysts Weigh In on Borrowing Overshoot

Economists have noted that much of the December borrowing overshoot was due to one-off factors and components subject to revision, suggesting the figures may not be as dire as they appear.

Market Trends Provide Some Relief

Despite fiscal pressures, market borrowing costs have eased recently, with British gilts emerging as the third-best performing bonds among G7 countries this year.

“Britain Budget Deficit Surges in December” “Britain Budget Deficit Surges in December”