3h ago
08.38
CEST
Introduction:
UK annual borrowing nearly £15bn above official forecast; stocks rise as Trump
rows back on Fed attack
Good
morning, and welcome to our rolling coverage of business, the financial
markets, and the world economy.
Government
borrowing in the UK rose more than expected last month, which means the
government borrowed nearly £15bn more than forecast over the year than in the
previous fiscal year, underlining the challenges the chancellor Rachel Reeves
faces.
Borrowing
– the difference between total public sector spending and income – was £16.4bn
in March; this was £2.8bn higher than in March 2024, and the third-highest
March borrowing since monthly records began in 1993.
This
means the government borrowed £151.9bn in the fiscal year to March – £20.7bn
more than in the previous year, and £14.6bn more than the £137.3bn forecast by
the Office for Budget Responsibility (OBR), the arbiter of the public finances.
Nabil
Taleb, economist at PwC UK, said:
Debt
interest payments reached £4.3bn in March, the highest March figure since
monthly records began 27 years ago. This reflects the fiscal challenge the
chancellor faces. Higher debt servicing costs as a share of total revenues will
leave the public finances more exposed to future economic shocks.
Rachel
Reeves continues to hold the fiscal line, but the next six months will be
critical—and she needs some clear wins. While her spring statement restored the
£9.9bn headroom, that cushion remains precarious. In the worst-case scenario
outlined by the government’s independent forecaster, Trump’s new tariffs could
alone shave 1% off UK GDP—enough to wipe out the headroom entirely. The rising
cost of government borrowing and growing global uncertainty are compounding the
pressure for Reeves to put tax rises on the table during the autumn budget.
Stocks
and the dollar bounced back and oil prices rose, as Donald Trump rowed back on
his attacks on America’s top central banker, whom he called a “major loser” on
Monday for now cutting interest rates.
The US
president said he had no plans to fire Federal Reserve chair Jerome Powell, and
hints at lower tariffs for China, also from the US treasury secretary, cheered
investors. Scott Bessent said the current tariff situation is “unsustainable”
and expects a de-escalation in the near term.
Trump
said during a White House news conference that high tariffs on goods from China
will “come down substantially, but it won’t be zero”.
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