UK public debt soars to highest since 1963, retail sales go down

A measure of British public debt leapt to close to 100% of the country’s economic output in April, its highest in nearly 60 years, and retail sales slumped by a record 18% as the coronavirus crisis hammered the economy.

Government borrowing of 62.1 billion pounds ($75.80 billion) in April alone was just a fraction lower than its total for the whole 2019-20 financial year.

It was also far higher than a median forecast of 40 billion pounds in a Reuters poll of economists.

On top of that, March’s borrowing was revised up sharply to almost 15 billion pounds as the government’s emergency job-saving scheme began and tax revenues were revised down.

That took the stock of public debt to nearly 98% of gross domestic product, also reflecting a lower estimate of the size of the economy based on a recent coronavirus scenario by Britain’s budget forecasters.

It was the highest share of GDP by that measure since 1963, the Office for National Statistics said.

In April last year, it had stood at 80% of GDP.

“The double whammy of the precipitous fall in economic activity and the government’s measures to combat the crisis has already pushed borrowing to alarmingly high levels,” Ruth Gregory, an economist with Capital Economics, said.

“While the small easing of the lockdown on May 13 probably meant the government did not have to borrow quite as much this month as in April, it’s clear the government will still have to borrow a few hundred billion pounds this year.”

Bank of England Deputy Governor Dave Ramsden told Reuters that an economic recovery later this year could be slower than in a central bank scenario published earlier this month, and he pointed to several risks of long-term damage.

“While there is significant pressure on the public finances, there are no signs that the government is struggling to find the cash,” Charlie McCurdy, a researcher at the Resolution Foundation think-tank, said.

British government borrowing costs over two and five years fell to new record lows as debt markets opened on Friday.

“It would therefore be wrong to reduce coronavirus support measures prematurely,” McCurdy said.

Central government spending leapt by 54% to over 109 billion pounds while receipts fell about 26% to 45.6 billion pounds.

The ONS also said British retail sales fell by the most on record in April as much of the sector was shuttered by the government’s coronavirus lockdown. Sales volumes slumped 18.1% in April from March, a slightly bigger fall than forecast in the Reuters poll.

James Smith, an economist with ING, said there might not be a quick bounce-back for retailers when the lockdown is lifted.

“Recent surveying from YouGov showed that just under half of people would be uncomfortable with returning to a clothing shop, although the jury is out on whether the public will become more relaxed by the time retailers do reopen next month,” he said.

Reuters