British state borrowing drops in November

21st December 2011, Comments 0 comments

The British government's borrowing fell by more than expected last month, official data showed on Wednesday, after Moody's urged it to stick to its deficit reduction plan or risk a downgrade.

Public sector net borrowing hit £18.1 billion (21.7 billion euros, $28.5 billion) in November, the Office for National Statistics (ONS) said in a statement.

That undershot market expectations for £19.8 billion, according to analysts polled by Dow Jones Newswires, and compared with net borrowing of £20.4 billion in November 2010.

Net borrowing fell as the government's taxation revenues increased at a faster pace than expenditure, according to the ONS.

Moody's on Tuesday stressed that the British government needed to "stay on track" with its deep public spending cuts or risk a downgrade to its top AAA credit rating.

In its annual update to the markets on Britain's credit outlook, the US ratings agency highlighted the ongoing eurozone crisis and rising public debt as potential triggers for a downgrade.

"The significant increase in the UK government's deficit and debt metrics since 2008, the weaker macroeconomic prospects and the risks emanating from the euro area crisis mean that the UK's stable AAA rating has a reduced ability to absorb further macroeconomic or fiscal shocks without rating implications," Moody's warned.

Britain's Conservative-Liberal Democrat coalition government has sought to slash spending since coming to power last year when it inherited a record public deficit from the ousted Labour administration.

The government has forecast public sector net borrowing to hit £127 billion, or 8.4 percent of gross domestic product (GDP), in the financial year ending in April.

Although not a member of the eurozone, Britain is a key trading partner of the single-currency area and it is bound by the EU limits on public deficits and debt.

© 2011 AFP

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