Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
British public borrowing has almost halved so far this financial year as the economy continues to recover from the pandemic, in a final healthcheck ahead of next week’s budget.
Government borrowing fell to £21.8bn in September, a drop of around £7bn compared with September 2020, and less than economists forecast.
That’s the second-highest September borrowing since monthly records began in 1993, reflecting the cost of the pandemic.
It means the UK has borrowed £108.1bn since April — around £101bn less than in the first half of the last financial year, when the pandemic drove borrowing to record levels.
That’s also sharply lower than the £151.1bn which the Office for Budget Responsibility had expected to have been borrowed so far this year.
Borrowing so far this financial year has consistently undershot the forecasts from the OBR, which could give chancellor Rishi Sunak some flexibility on tax and spending.
In September, central government receipts rose to around £62.3bn, an increase of £6.2bn than a year ago — as tax revenues were lifted by the recovery.
Spending by Central Government bodies dipped a little, down £1.3bn to £84.1bn.
Martin Beck, senior economic advisor to the EY ITEM Club, says the public finances have improved faster than expected:
“Stronger-than-expected tax receipts continued to account for the bulk of the borrowing undershoot, though spending has also fallen back more quickly than anticipated.
In both cases this reflects a much stronger recovery in activity than the OBR’s cautious forecast. These improvements are set to be sustained, and the EY ITEM Club expects full year borrowing to come in at just over £200bn, well below the OBR’s forecast of £234bn.
Overall, the UK’s national debt is now £2,218.9bn. That’s around 95.5% of gross domestic product (GDP), the highest ratio since the 98.3% recorded in March 1963.
Also coming up today
The crisis at Evergrande is looming over the markets again today. Stock markets are edgy after the Chinese property giant’s effort to sell a stake in its property services unit collapsed, putting more pressure on the company as it tries to avoid default.
Shares in China Evergrande Group, the parent company for the sprawling empire built by former steel industry executive Xu Jiayin, are down almost 12% in afternoon trading in Hong Kong as trading resumes after a two-week suspension.
Evergrande Property Services, one of its most profitable units, was off by 6.45%.
My colleague Martin Farrer explains:
Evergrande announced on Wednesday that it had formally abandoned plans to sell a 50.1% slice of Evergrande Property Services, and said there was “no guarantee” it could meet its financial obligations in order to stay afloat.
The company, which is China’s second-biggest property developer with thousands of projects, has debts of $305bn.
But it is running out of cash thanks to a government crackdown on lending, and a slump in property sales and prices, sending shockwaves through the Chinese economy and global financial markets.
Kyle Rodda of IG says:
Sentiment has turned slightly in Asian markets today, despite Wall Street’s positive lead, as market participants continue to focus on earnings beats over inflation pressures, slowing growth and policy risks.
News on the Evergrande front hasn’t helped risk appetite to be sure, with the company’s shares falling today upon return from a trading halt, with news a takeover deal for it property arm has fallen through adding to fears of a technical default as soon as tomorrow.
European markets are expected to open lower.
- 7am BST: Public sector net borrowing for September
- 11am BST: CBI industrial trends survey for October
- 1.30pm BST: UK weekly jobless claims
- 3pm BST: Eurozone consumer confidence for October