UK Public Debt Breaches 2 Trillion-Pound Mark for First Time

Business

August 21st, 12:43pm

Asharq Al-Awsat

Shoppers pass a sale sign in a shop window on Oxford Street in London, Thursday, Aug. 13, 2020. The British economy is on course to record the deepest coronavirus-related slump among the world's seven leading industrial economies after official figures showed it shrinking by a 20.4% in the second quarter of 2020 alone said The Office for National Statistics. (AP Photo/Kirsty Wigglesworth)

Britain's government debt has breached the 2 trillion-pound ($2.6 trillion) mark for the first time after heavy borrowing to support the economy during the coronavirus pandemic. The Office for National Statistics said Friday that the government borrowed a further 26.7 billion pounds in July, the fourth highest amount of any month since records began in 1993. That pushed up debt to 2.004 trillion pounds. The increase also means that the country's debt is now higher than the value of its economic output. The UK's debt is worth 100.5% of its annual GDP, the first time it has gone beyond 100% since 1961. The deterioration in the public finances is due to the massive support schemes the government has put in place over the past few months to cope with the economic shock of the pandemic, which has already seen the British economy shrink by around a fifth. The government has cut an array of taxes and spent heavily, notably on a widely used salary support scheme. "This crisis has put the public finances under significant strain as we have seen a hit to our economy and taken action to support millions of jobs, businesses and livelihoods," Treasury chief Rishi Sunak said. "Without that support things would have been far worse." There are some signs that the economy is picking up steam following an easing of lockdown restrictions over the past couple of months. Perhaps the most important move for the economy's health was the reopening of shops selling items deemed to be nonessential, such as sneakers or books, in mid-June. That was particularly important for an economy that is heavily reliant on the retail sector. Figures released Friday showed that shoppers returned to high streets in increasing numbers in July even though business at clothes and household goods stores remains below pre-pandemic levels. The statistics agency said retail sales rose by a monthly 3.6% and are now 3% above pre-pandemic levels. There's a distinct split in the overall increase though between food and online retailers, which have surpassed February´s sales figures, and non-food businesses, which have not. "Retail sales have now regained all the ground lost during the height of the coronavirus restrictions as more stores open for trade and online sales remain at historically high levels," statistician Jonathan Athow said. The government is hoping that a buoyant retail sector will help protect millions of jobs in coming months. So far, Britain has been spared the sharp rises in unemployment seen in the United States, for example, because of the government´s Coronavirus Job Retention Scheme, which pays the majority of the salaries of workers who have not been fired. Some 1.2 million employers have taken advantage of the program to furlough 9.6 million people at a cost to the government of 35.4 billion pounds. Sunak has said that not all jobs can be saved and has warned of a sharp rise in unemployment. Already, the pandemic has led to more than 40,000 job losses. Marks & Spencer said this week it was axing 7,000 jobs and other household names like Debenhams, House of Fraser and John Lewis have also voiced concern.

from Asharq AL-awsat https://english.aawsat.com/home/article/2461336/uk-public-debt-breaches-2-trillion-pound-mark-first-time