Record interest on the debt, falling retail sales, confidence at half mast: the British economy is accumulating new negative signals in a country in the midst of a political and financial crisis.
Interest on Britain’s debt reached 7.7 billion pounds in September (C$11.9 billion), 2.5 billion more than a year earlier and the highest amount paid since these statistics began monthly in 1997.
Since mid-2021, the State’s debt burden “has increased considerably, not because of the increase in debt”, but “largely because of inflation”, commented the National Office of statistics (ONS) on Friday in its monthly report.
Government-sponsored non-bank government borrowing rose 2.2% year on year to 20 billion pounds (C$31 billion) in September, the highest level on record since the start of these statistics thirty years ago, except the record during the Covid-19 pandemic.
Public debt reached for its part – excluding public banks – 2450.2 billion pounds (3787 billion Canadian dollars) at the end of September, representing 98% of GDP and 2.5 percentage points of GDP more than a year earlier .
“To stabilize the markets, I clearly said that difficult decisions were going to be taken in order to protect” the accounts of the State, warned Jeremy Hunt, the Chancellor of the Exchequer.
Appointed a week ago in the face of the market debacle caused by the “mini-budget” of his predecessor at the Ministry of Finance, Jeremy Hunt immediately canceled almost all of these expensive and unfunded budgetary measures to devastating effect.
He must present a medium-term plan on October 31, which should include cuts in public spending and possible tax increases, in total opposition to the campaign promises of the ephemeral Prime Minister Liz Truss, forced to resign Thursday face to the sinking of his government.
Pressure is mounting in particular to impose a tax on the profits of energy companies that is more substantial than at present. And the British press evokes a possible taxation of the banks, which profit from the blaze of the interest rates.
Sapped credibility
Jeremy Hunt’s plan is uncertain, however, with the new chancellor unsure whether he will remain in office in the next government.
In the midst of a political slump, the country is also going through an economic storm with flat activity, inflation at more than 10% – the highest in the G7 – an energy crisis and millions of Britons falling into poverty.
This all affects consumption: retail sales fell 1.4% in September compared to August, and they have been declining for months.
The ONS explains the decline in September not only by the rise in the cost of living, but also by the impact of the national day off for the funeral of Queen Elizabeth II last month, with the closure of very many businesses. .
The GfK index on confidence also reflects a lackluster mood among consumers.
After jumping on Thursday at the announcement of the resignation of Liz Truss, the pound fell on Friday: it lost 0.33% to 1.1196 dollars, around 8:45 a.m. London time.
Its historically very depressed level, as well as the rebound in the reverse of long-term debt yields on the market on Friday, illustrated the mistrust of investors.
The cost of 30-year government debt rose to 4.022% around 8:45 a.m., crossing the 4% threshold again. At the end of 2021, it was worth just over 1%.
The “mini-budget” had pushed it to more than 5%, weakening the asset funds held by pension funds and the Bank of England had intervened to prevent a financial crisis.
“Political turbulence and the budgetary about-face have eroded the country’s credibility among international investors, observes Richard Hunter, analyst at Interactive Investor.
The figures published on Friday add to this gloomy picture and testify to the difficulty of the task for the next government.