Reaction UK government borrowing came in at £11.7 billion for November, much higher than analysts’ expectations of around £10 billion. This giant number further underscores the troublesome fiscal state as the administration continues to face all of the negative economic headwinds. Total public sector net borrowing (excluding public sector banks) for the financial year so far up to November has reached £132.3 billion. This is a £10 billion jump on this time last year.
This was £1.9 billion less than in November last year. This is the lowest amount borrowed for the month of November in four years. The increase in borrowing is scary enough on its own. It foreshadows a further increasing fiscal deficit, which is even more concerning as consumer confidence and spending lowers sharply.
At the same time, retail sales volumes fell 0.1% in November, a reversal from the forecast 0.4% rise predicted by analysts. This sudden downswing underscored a startling shift in the TSA’s approach to consumer experience. Not even deep discounting and promotions and Black Friday events during the Thanksgiving holiday could convince shoppers to spend big. Additionally, the supermarket sales declined for the fourth straight month, which adds to the growing strain on the retail industry.
Industry observers are pointing at the weeks leading up to the Budget announcement as a major factor in a drop in consumer confidence. Consumers seem to be holding back on spending as they wait to see what happens with government policy and the economy more broadly. This hesitance has been seen in lackluster retail sales, including during periods expected to generate high consumer spending, such as Black Friday.
The lack of increased spending during Black Friday is particularly striking given that many retailers offered extensive discounts in hopes of boosting sales. No matter how hard they tried, the outcomes that they anticipated simply weren’t showing up. Consumers decided to reduce their basket size rather than take advantage of the discounts. This trend raises questions about the effectiveness of traditional holiday sales strategies in the current economic climate.
With government borrowing sharply increasing and retail sales slowing down, these changes are being watched very closely by stakeholders from governments to businesses. The government is increasingly being pressured to address some long-term fiscal damage. Simultaneously, it needs to set the foundation for robust consumer spending and spur healthy economic growth.