Extract from Redwood Financial’s Economic Review April 2021
The latest public sector finance statistics have once again highlighted the enormous cost of government measures to support the economy through the pandemic.
Figures released by ONS revealed that UK public sector net borrowing (the gap between the country’s overall income and expenditure) totalled £303bn in the latest full financial year (2020/21). This was a staggering £246bn more than was borrowed during the previous fiscal year, with borrowing amounting to 14.5% of national output, the highest ratio on this measure since the end of World War II.
Despite this record figure, the latest data was an improvement on previously forecast levels. While the data does not currently include £27bn of potential coronavirus loan write-offs that the Office for Budget Responsibility estimates will need to be made, the 2020/21 total actually undershot the independent forecaster’s mammoth March prediction by £24bn.
Borrowing is predicted to continue at historically high levels for the rest of this year, with the government having already committed to support the jobs market until the autumn. However, economists are now suggesting the prospect of a stronger economic recovery over the remainder of 2021 could result in borrowing falling more quickly than anticipated from current levels.