(Bloomberg) — U.K. government borrowing climbed to a record 240.9 billion pounds ($323 billion) in the first eight months of the fiscal year, reflecting the damage inflicted on an economy now at risk of falling back into recession.
In November alone, spending exceeded tax revenue by 31.6 billion pounds amid the escalating cost of supporting firms and households through the pandemic, Office for National Statistics figures published Tuesday showed. It leaves Britain facing its largest ever peacetime budget deficit.
Separate figures confirmed the economy rebounded strongly in the third quarter. But a contraction is expected this quarter, and hopes of recovery early next year are fading after the government tightened restrictions to combat a mutated coronavirus and several European countries banned entry from Britain. Meanwhile, deadlocked talks over a Brexit trade deal are heading toward a Dec. 31 cliff edge.
The multiple threats pile pressure on Chancellor of the Exchequer Rishi Sunak and Bank of England policy makers to step up fiscal and monetary support, with some analysts now predicting the economy will shrink in the first quarter too.
The potential hit means that the budget deficit in the fiscal year as a whole could be larger than the 394 billion pounds — 19% of GDP — predicted by the Office for Budget Responsibility last month. That’s already the biggest among major industrial nations.
A worse-case virus scenario combined with a no-deal Brexit could see borrowing soar to almost 450 billion pounds in 2020-21, with debt topping 125% of GDP in the following year, the fiscal watchdog warned.