UK government borrowing came in well above expectations in November, taking the total for the financial year to date up to £132.3 billion. This represents a £10 billion leap relative to the same time last year. In November, the amount borrowed was £11.7 billion. This sum is £1.9 billion lower than the November 2022 settlement.
November’s borrowing total is the smallest for the month in four years. While that’s down from last year—which was down from the previous year—the overall drop is monumental. Analysts had been expecting net government borrowing to be around £10 billion for November, so a good bit better than expected. The lessons from today’s borrowing trends point to a more complicated economic environment as the federal government pursues fiscal policy while consumer spending shifts and sways.
Tough going on the retail sales side in November too, with sales volumes down 0.1%. Analysts predicted an increase in sales of 0.4% that month. The numbers uncovered a huge discrepancy between what they were projecting and what they were actually delivering. With supermarket sales decreasing for a fourth month in a row, consumer confidence may be coming into question.
Discounts offered by retailers during Black Friday did not significantly boost spending as in previous years, pointing to a potential shift in consumer behavior. Rob Wood, an economist, noted that “the chaotic run-up to the Budget hit consumer spending, driving retail sales into two consecutive monthly falls after a run of four rises from June to September.”
The current state of the economy likely played into feelings of uncertainty, eroding shopper confidence and lowering propensity to spend. Many analysts attribute this uncertainty over the future Budget with contributing to a dampening of consumer confidence.
We appreciate government officials speaking up about how the increasing debt burden makes it harder to deliver essential human services. From an unspecified Treasury official, we learned that £1 in every £10 we spend is now on servicing the debt. This is money that could be much more productively invested in public services.
In light of these challenges, Chief Secretary to the Treasury James Murray reiterated the government’s commitment to fiscal responsibility, stating they aim to “deliver on our pledge to cut debt and borrowing.” Officials are sure to be talking further about these new permanent fiscal strategies in the months ahead. They will consider the impact of increasing government borrowing on the performance of the retail sector.