Public sector borrowing hit a new high in February, with the U.K. government borrowing £19.1 billion ($26.6 billion) last month, as spending on measures amid the COVID-19 pandemic continued while tax receipts fell.
Monthly borrowing in February hit the highest point since records began in 1993. Recent increases in spending have pushed the national debt up sharply, with public sector net debt standing at 97.5% of gross domestic product — the highest levels since the early 1960s.
Central government bodies spent around £72.6 billion on day-to-day business last month, including £3.9 billion tied to government job support programs amid the pandemic, according to data released by the Office for National Statistics (ONS) on Friday. February spending was £14.2 billion more than in the same month in 2020.
As spending ratcheted up, tax receipts fell by an estimated £1.5 billion from February 2020, with central government tax receipts estimated to have been £46.2 billion last month. Notable decreases in taxes came from value-added tax, business rates, and fuel duty, which have been affected by lockdown measures, the ONS said.
Borrowing in the current financial year now stands at £278.8 billion, about five times more than in the same period a year ago, with official forecasts estimating that this figure may reach £327.4 billion by the end of the current month.
News of the worsening public finances hit an already down day of trading. The FTSE 100
the index of London’s top stocks by market capitalization, fell more than 1%, in line with many of the major European indexes.
“Stock markets in Europe have taken their cues from the large declines seen in the U.S. last night,” said David Madden, an analyst at CMC Markets. “The bearish moves on Wall Street were sparked by higher bond yields and that has spilled over to the European session today, even though things have cooled a little on the yields front.”
The yield on the benchmark 10-year U.S. Treasury
held below 1.7% for much of the day, but spiked to 1.72% after the Federal Reserve said it would not extend bank capital level exemptions instituted during the pandemic.
Oil, mining and banking stocks led the charge into the red in London.
Crude prices are down since a sharp fall late on Thursday, as “oil sentiment towards Europe seems to be rock-bottom at the moment,” according to analyst Stephen Innes of Axi. The price of benchmark Brent crude
is hovering around the $63.30 a barrel mark, down around 7% from above $68 a barrel on Thursday.
“Still, as the vaccine continues coursing its way throughout the world, with major European countries resuming the use of AstraZeneca’s dose, a sustained global demand recovery is expected sometime soon,” said Han Tan, an analyst at FXTM.
Shares in London-listed major oil companies BP
and Royal Dutch Shell
were down, joining the chorus of commodity stock woes along with miners Rio Tinto
Settling around 1% higher, NatWest
stood out among British banking stocks. The boost came as the U.K. government announced the sale of £1.1 billion worth of NatWest shares back to the bank, representing around 5% of the total shares in issue. The sale will cut the government’s stake to less than 60%.