UK government borrowing was £11.7 billion in November, significantly above analysts’ expectations of around £10 billion. This figure emphasizes an important inflection point. This is the first month in four years that borrowing has been this level, and £1.9 billion lower than last year’s figures for the same month. The numbers are startling, with total government borrowing for the financial year to November hitting £132.3 billion. This figure is £10 billion higher than it was over the same period last year.
These new borrowing figures are released at the same time as the UK economy reportedly faces a drop in retail sales. Analysts had expected a small increase of 0.4% in overall sales volumes for November. When the dust settled, that data actually showed an increase of 0.1%. Supermarket sales were especially poor, tumbling for the fourth month in a row, a sign that inflationary pressures are still squeezing consumers.
The underwhelming retail numbers come at a time when retailers were pushing big sales to offset losses during this year’s Black Friday sales. Despite these efforts, consumer spending failed to live up to high hopes, pointing to shifting shopping patterns and prevalent inflationary headwinds.
Rob Wood commented on the recent decline in consumer spending, stating, “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.” No doubt that sentiment reflects the pervasive effect of economic uncertainty on consumer behavior.
Chief Secretary to the Treasury, James Murray, was clear that we require a return to fiscal responsibility. He noted, “£1 in every £10 we spend goes on debt interest – money that could otherwise be invested in public services.” We believe this warning underscores the harm that comes from driving up borrowing costs to fund public services.
Murray reaffirmed the government’s commitment to addressing the country’s fiscal challenges, stating they would “deliver on our pledge to cut debt and borrowing.” To meet this moment, the federal government’s approach should reflect a balance between long-term fiscal health and the urgent need for financial support.