British borrowing strikes record but government on track

18th November 2010, Comments 0 comments

British public sector borrowing hit a record high for the month of October, official data showed on Thursday, despite concerted government efforts to slash the deficit.

However revisions to previous months' figures leave the government on course to meet its fiscal target for the current 2010-2011 financial year.

Britain's data comes as its highly-indebted neighbour Ireland appeared on course to accept an EU bailout worth tens of billions of euros, according to the head of the Irish central bank.

The British government's public sector net borrowing requirement jumped to 10.3 billion pounds (12.1 billion euros, 16.4 billion dollars) last month, the Office for National Statistics (ONS) said in a statement.

That compared with borrowing of 10.1 billion in October 2009. Analysts had forecast a rise to 9.4 billion pounds according to a survey by Dow Jones Newswires.

"Public sector borrowing was larger than expected in October, but downward revisions to borrowing earlier in the year mean that the government still appears to be on track to meet its full-year borrowing forecast," said Barclays Capital analyst Simon Hayes.

"However, revisions meant that borrowing in September was 1.2 billion pounds lower than previously estimated and in the financial year to date borrowing was 2.3 billion pounds lower.

"As a result, the cumulative level of borrowing in the year to October was below expectations. A simple trend extrapolation of the year-to-date data suggests that borrowing is on track to meet the budget full-year forecast of 149 billion pounds," Hayes added.

Last month, British finance minister George Osborne unveiled plans to slash public spending in a bid to reduce a record deficit totalling around 155 billion pounds.

It comes as Britain faces an uncertain economic recovery after recession.

Although the economy officially grew by a robust 0.8 percent in the third quarter, soothing fears of a double-dip recession, economists expect weaker growth ahead amid the spending cuts and tax hikes.

"The key question is whether growth in 2011 and beyond can come in as strong" as government forecasts, said Charles Davis, an economist at the independent Centre for Economics and Business Research.

"We have our doubts on this as the UK feels the chill of fiscal austerity on two fronts over the coming years: at home and in its key European export markets.

"The sovereign debt crisis in Ireland underlines the latter -- and the importance of implementing a credible deficit reduction strategy," Davis added on Thursday.

© 2010 AFP

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