The COVID-19 pandemic has made top western nations turn to borrow to keep the economy running. The borrowing ratio of the UK has increased according to the ONS.
UK borrowing increases as the economy needs to stabilize
The UK borrowing figures have risen to over £35 billion last month, the highest since the COVID-19 pandemic hit the world. This figure is also the second-highest figure in any month since 1992 according to figures available from the Office of National Statistics.
This amount according to ONS chief Rishi Sunak is alarming and could affect the UK economy in the future if not adequately monitored. Furthermore, a survey monitoring UK companies’ revenue and sales shows a drastic decline. Using the closely watched purchasing managers index (PMI), it can be deduced that there is a slight slump in the firm’s activities.
The ONS has also warned that the UK will find it difficult to get out of recession on time. Government lending for the year has reached £289.6 billion which is over 80% higher than a year ago according to ONS figures. The budget office of the (OBR) has calculated that lending could reach £400 billion by the end of March.
Pay-freeze for all UK public workers to reduce spending
A pay-pause has already been placed on about 1.5 million public servants as part of measures to reduce government spending. The increase in borrowing has increased national debt figures to about 2.2 trillion pounds.
The UK’s total debt profile has now reached 99.5% of gross domestic products (GDP) which has not been seen since 1962. Borrowing this year has been essentially due to the COVID-19 pandemic, and also the total government deficit is the highest in recent times.
Spending on economic supports like the furlough process was around £11b in January alone. Also, vaccine procurement, testing instruments, and PPE increased borrowing to £10 b fork £8.9 b last year. Despite the high borrowing rate, interest on these loans was a little about £110 m in December.