UK borrowing unexpectedly jumps, piling pressure on Rachel Reeves
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Increase to £17.8bn is well above City forecasts and is highest December figure for four years. The cost of UK government borrowing unexpectedly jumped to £17.8bn last month, piling pressure on Rachel Reeves to plan budget cuts before a spending review in the summer.
The figure was about a quarter higher than the City had forecast and was up by £10.1bn more than in the same month a year earlier, making it the highest December borrowing for four years. Economists polled by Reuters had predicted that public sector net borrowing (excluding public sector banks) would be £14.1bn in December, up from £11.25bn in November.
The Office for National Statistics (ONS) said spending on government services, benefits and debt interest payments were up. The data covers a period when the UK cost of borrowing had been climbing, but before the turmoil in global bond markets earlier this month that sent the yield – effectively the interest rate – on government debt surging.
The yield on UK 30-year bonds rose to its highest level since 1998 last week before easing back after data showed the rate of inflation had fallen to a lower than expected 2.5% in December. Reacting to the uncertainty, currency traders sent the pound tumbling to a 14-month low of $1.22 in early January before a modest rise of two cents in the last week. In September last year the pound stood at $1.34.
