UK debt level jumps to 60-year high

RT
Fri, 20 Sep 2024 14:18 UTC

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The Tipping Point

Government borrowing has reached 100% of the country's GDP, according to the Office for National Statistics.

The UK's national debt stands at 100% of the country's annual economic output and is at its highest level since the 1960s, the Office for National Statistics (ONS) revealed on Friday.

Government borrowing surged to £13.7 billion ($18.2 billion) in August, equaling to the annual value of total economic production, according to the ONS. Its chief economist Grant Fitzner said:

"Borrowing was up by over £3 billion last month on 2023's figure, and was the third highest August borrowing on record."

The data reflects the alarming state of public finances left by the Conservatives, according to Treasury Chief Secretary Darren Jones. He warned that the Labor Party would have to make "tough decisions" to rebuild the economy:

"When we came into office, we inherited an economy that wasn't working for working people. Today's data shows the highest August borrowing on record, outside the pandemic. Debt is 100% of GDP, the highest level since the 1960s."

Government debt ballooned during the global financial crisis in 2008 and then again during the Covid-19 pandemic. Weak economic growth since then has also contributed to the increase in the deficit.

According to Matt Swannell, the chief economic adviser to the EY Item Club:

"The UK's fiscal position remains challenging and could deteriorate further over the remainder of the year. The government will likely have to increase spending over the next few months, due to a combination of accepting the recommendations for higher pay increases from public sector pay boards and non-labor cost overruns across a range of government departments."

Rachel Reeves, the chancellor of the exchequer, earlier warned that taxes will go up in the October budget - ruling out, however, increases in rates of income, corporation, and value-added taxes.

In August, Reeves announced she would scrap winter fuel payments introduced by former UK Prime Minister Rishi Sunak at the peak of the cost-of-living-crisis, postpone plans for social care reform, and slash road, rail, and hospital investment as part of a plan to reduce borrowing.

Comment: Economies are on the chopping block! Another financial alarm goes off:

The German economy has been shrinking over the past two years and will remain stagnant for the rest of the year as it continues to grapple with economic malaise, Bloomberg reported on Friday.

According to a survey conducted by the outlet, the EU's top economy has been stalling in the three months through September, marking a deeper-than-expected decline.

Economists have already started downgrading their forecasts for this year, with some now seeing protracted stagnation or even another downturn.

Martin Belchev, an analyst at FrontierView told Bloomberg:

"While we expect the market to see a mild recovery at the end of 2024 and in 2025, much of it will be cyclical, with downside risks remaining acute."

He warned that the faltering automotive sector will further exacerbate downward pressures on growth as the top four German carmakers have seen double-digit declines.

The country's central bank said on Thursday in its monthly report that the German economy may already be in recession. According to the Bundesbank, gross domestic product (GDP) "could stagnate or decline slightly again" in the third quarter, after a 0.1% contraction in the second quarter.

Economic sentiment in the country has suffered due to weak industrial activity, Budensbank President Joachim Nagel said on Wednesday.

"Stagnation might be more or less on the cards for full-year 2024 as well if the latest forecasts by economic research institutes are anything to go by."

German industry is struggling amid weak demand in key export markets, shortages of qualified workers, tighter monetary policy, the protracted fallout from the energy crisis, and growing competition from China.

The Eurozone's largest economy has been falling behind its peers over the past years, largely due to a prolonged manufacturing downturn. Germany was the only Group of Seven economy to contract in 2023.