UK national debt soar to £2.24 trillion, surpasses economy’s size

UK national debt soar to £2.24 trillion, surpasses economy's size

U.K.’s national debt surged—the highest since data-tracking began—as government borrowing in August hit £35.9 billion.

The national debt held by the public has soared passed the size of the U.K. economy as the pandemic’s impact takes a toll on the public’s finance. But independent forecasters from the Treasury expect the debt to reach £372.2 billion for the fiscal year ending March 2021.

COVID-19 spending sent national debt to rise

U. K’s borrowing for the month of August has hit £36 billion, per the report provided by the Office for National Statistics, sending the national debt to climb as much as £2.24 trillion. The increase is said to be the highest since data recording started in 1993.

The estimated borrowing for the first five months of the financial year, on the one hand, has accumulated nearly £174 billion.

Per the data, the government’s initiative to slash VAT for businesses under the hospitality sector pushed the overall sales tax for August lower compared to last year in the same period, with a £3.7 billion deficit. It paid a total of £500 million to cover the Eat Out to Help Out scheme as well.

UK national debt soar to £2.24 trillion, surpasses economy

The debt for August soar after the government covered some of the income lost by self-employed workers with a total of £4.7 billion.

Separately, August’s deficit was £2 billion lower than what analysts anticipated. It is £8 billion lower as well as what the Office for Budget Responsibility calculated earlier this year.

Figures could further increase

U.K.’s national debt, however, could further climb according to OBR, Treasury’s independent forecaster. The agency claimed that borrowing could surge to as much £372.2 billion in the fiscal year ending March 2021.

Economists even warned of a prolonged recession recently. Analysts from the Bank of America (BoA), for instance, expect a delay for the U. K’s gross domestic product (GDP) growth in the fourth quarter of 2020 through 2021 of March.

The implementation of tougher coronavirus restrictions—such as the nationwide curfew and the “rule of six”—will significantly affect the country’s economic activities too.

But the chief economist adviser of the EY Item Club said that the deficit is likely below the estimated figure provided by OBR, particularly when higher tax receipts and lower spending start.

“Even allowing for the fact that the rate of decline in the public finances should slow as the economy continues to recover following record contraction of 20.4% quarter on quarter in the second quarter,” Howard Archer explained, per The Guardian.

Featured image courtesy of Pixabay/Pexels

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