£1billion off borrowing is not enough says new post-Brexit Data
BRITAIN will overshoot its budget deficit target by more than £10billion economists predict, based on current Government borrowing levels.
On Wednesday, new data from the Office for National Statistics is expected to show that the Government borrowed £10billion in August, compared to £11.1billion the same month in 2015. Although the budget deficit for the first four months of the 2016/17 financial year is £3billion lower at £23.7billion than it was at the same point last year, economists say that it is still likely to breach the £55.5billion target set by the Office for Budget Responsibility in the March Budget.
Investec chief economist Philip Shaw said: “Everyone has been waiting to see if there would be a post-Brexit vote deterioration in the public sector finances, but that has not happened so far, due in large part to the retail sector.
“However, the rate of improvement in Government borrowing is disappointing and we expect that to continue to be the case. It needs to be £1.5billion lower per month if we are to hit the OBR’s target, but it is just not happening.” Retail sales grew strongly in July and August according to data from the ONS, but since June’s Brexit vote, business confidence has been shaken and activity in a number of sectors has slowed.
IHS Markit chief UK and European economist Howard Archer said: “While the economy is showing resilience, there has likely been some slowdown in activity since Brexit, which will impact on tax receipts. While the public finances showed improvement during the first four months of this fiscal year, they are still behind schedule.”
The rate of improvement in Government borrowing is disappointing
According to Capital Economics, the £1.1billion financial improvement in August was due in part to the deadline for self-assessment tax receipts. Economist Ruth Gregory explained that as the July 31 deadline fell on a Sunday, payments were received in August, providing a one-off boost. She added: “It still will not be enough to see borrowing on track to meet the OBR’s forecast.”
Chamber of Commerce defends gloomy post Brexit forecast
Elsewhere, new research from payment processing group Worldpay found that 46 per cent of small retailers believe there will be a drop in consumer spending over the next 12 months, while 26 per cent believe conditions will remain unchanged. Its survey of more than 500 small retailers also found that 44 per cent have delayed investments in technology and sales channels because of the Brexit vote. Worldpay warns that left unchecked, their negativity could hamper their ability to grow.
Dave Hobday, Worldpay UK managing director, said: “The businesses that will thrive in the postvote environment will not be those that batten down the hatches, but those that invest and innovate to deliver the type of technology driven experience and service that their customers are demanding.”