The UK’s public debt has skyrocketed to just over £2tn for the first time amid the government’s spending drive to support the economy amid the coronavirus crisis.

In July, net debt – excluding public banks – increased by nearly £230bn from the same period last year to £2.004tn, according to the Office for Budget Responsibility. Debt was 100.5% of GDP, an increase of 20.4 percentage points compared to July 2019.

Borrowing hiked up to £150.5bn from April to July, £128.4bn more than last year and the highest in any April to July period since records began in 1993.

Chancellor of the Exchequer Rishi Sunak said: “This crisis has put the public finances under significant strain as we have seen a hit to our economy and taken action to support millions of jobs, businesses and livelihoods.”

“Today’s figures are a stark reminder that we must return our public finances to a sustainable footing over time, which will require taking difficult decisions,” he added in a 21 August statement.

Michael Hewson, chief market analyst at CMC Markets UK, said: “This week’s economic data has continued to point to a UK economy that is continuing to shake off its post lockdown hangover. The staggered restart of the UK economy appears to be standing it in good stead with lower infection rates than its European counterparts, and this could well be helping with respect to a more steady recovery in some of the broader economic data.”

“Make no mistake these are huge sums of money, with UK government debt now above £2tn, but without some of the furlough money that has been repaid by a host of UK companies they could have been much higher,” Hewson added.

“This might give the Chancellor some wriggle room as we head into the autumn, especially if this morning’s August flash PMIs continue to support the narrative of a rebound in the UK economy.”

Government support programmes include the Coronavirus Business Interruption Loan Scheme for small and medium-sized businesses, which has approved £13.68bn loans through lenders, according to the Treasury’s latest statistics on 16 August.

The large businesses programme, known as the CLBILS, totalled £3.5bn and the 100% government backed Bounce Back Loan scheme has approved £35.47bn worth of loans.

Source: Private Equity News 

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