November Borrowing Hits Three-Year Low Amid Rising Inflation and Economic Concerns

In November, UK government borrowing reached its lowest level since 2021, totaling £11.2 billion. This change is attributed to increased tax revenues and a reduction in spending on debt interest payments, according to official figures from the Office for National Statistics (ONS). The borrowing figure is down by £3.4 billion from the previous year and below the anticipated £13 billion, bringing the total government borrowing for the financial year to £113.2 billion.

Despite the decrease in borrowing, concerns remain as the UK economy continues to exhibit weakness. Inflation has surged to 2.6%, surpassing the Bank of England’s target of 2%, which has led to downgraded growth forecasts from the Bank, predicting no growth for the final quarter of 2024. Retail sales showed a modest increase of 0.2% in November, bolstered mainly by better supermarket performance, despite a significant drop in clothing sales.

Economists have provided mixed sentiments regarding the latest financial figures. Ruth Gregory, deputy chief UK economist at Capital Economics, indicated that the unexpectedly low borrowing results could be positive news for Chancellor Rachel Reeves. However, she cautioned that the weakening economy might necessitate potential tax increases or spending cuts in the future. Similarly, Dennis Tatarkov from KPMG UK noted that while lower interest repayments have provided a temporary relief, the ongoing rise in actual and projected inflation could pose future challenges.

Responses to the figures indicated a recognition of the difficulties inherited by the current government. Darren Jones, Chief Secretary to the Treasury, stated that the government aims to focus on investment and reform to stimulate growth after inheriting “crumbling public services and crippled public finances.”

The Liberal Democrats acknowledged the positive drop in November borrowing but expressed concerns regarding the broader economic context, citing the remnants of the previous Conservative administration’s mismanagement.

As November’s retail sales figures reflect a continued preference for savings and careful spending among households, experts warn that economic indicators are showing signs of trouble ahead, highlighting the fragility of the current recovery efforts.