The U.K.’s public debt rose to its highest share of the annual gross domestic product (GDP) since 1961 in May ahead of the general election in two weeks, the latest data showed on Friday.
The U.K. public sector’s net debt, excluding public sector banks, reached 2.742 trillion pounds ($3.47 trillion) or 99.8 percent of the annual GDP in May, up from 96.1 percent in May last year, the Office for National Statistics revealed in its latest statement. The increase came despite the U.K. recording slightly lower-than-expected government borrowing in May at 15 billion pounds.
Borrowing in the U.K. reached 33.5 billion pounds in the first two months of the financial year, 0.3 billion pounds more than in May 2023. However, it was 1.5 billion pounds less than government budget forecasts had predicted in March. Excluding the Bank of England, debt reached 91.3 percent of GDP, 5.3 percentage points higher than in May 2023 but 8.5 percentage points lower than the wider debt measure.
In addition, the public sector’s net worth excluding public sector banks was in deficit by 725.7 billion pounds at the end of May 2024, a 95.2 billion pound increase from May 2023. Meanwhile, the central government’s net cash requirement reached 24.6 billion pounds in May 2024, 7.6 billion pounds greater than in May 2023.
Read: Swiss National Bank lowers key interest rate to 1.25 percent in second round of rate cuts
U.K.’s economic landscape
Almost all other Western countries saw an increase in public debt during the same period with U.K. debt levels remaining below those in the U.S., France and Italy.
Public debt surged in the U.K. during the COVID-19 pandemic and public finances have also been impacted by slower economic activity and higher interest rates, which reached a 16-year high. The British economy has seen some signs of easing as inflation cooled to 2 percent in May, hitting the Bank of England’s (BoE) target for the first time since July 2021, just ahead of the central bank’s June policy meeting.
Regarding interest rates, markets are pricing in a slight chance of any policy rate adjustments in June. However, they expect a 10 basis point cut by August, 18 basis points cumulatively by September, 31 basis points by November, and 41 basis points by year-end.
For more economy news, click here.
