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UK national debt hits £2tn for first time, as PMIs surge – business live

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Rolling coverage of the latest economic and financial news, as the Covid-19 pandemic drives UK government debt to record highs

At first glance, the UK PMI survey for August may look like a V-shaped recovery. But it’s not (at least not yet!).

Some early reaction to the strong UK PMI report, from Rupert Harrison of BlackRock…

UK services PMI stands out as very strong when other European services PMIs are notably weakening. Pretty encouraging

Maybe we are a little behind on reopening so still playing catch up. But also probably benefitting from still contained virus data. Need to keep it that way https://t.co/X376OJE4Ry

A very very odd recession – we’re moving out of the depth of the (first) output part of it, and into the depths of the unemployment part (which will itself then drive the second output hit) https://t.co/FtIwWfBpFY

Flash UK composite #PMI (a measure of changes in business activity) much stronger than expected in August – at 60.3.

We can debate exactly what this means in terms of levels or growth rates (and employment still weak), but overall it’s clearly good news.#vshapedrecovery pic.twitter.com/bv1sfejn9N

Breaking: UK companies have reported that growth accelerated in August, but they’re still cutting jobs.

IHS Markit’s latest healthcheck on British firms shows activity expanded at the fastest rate since 2013, with service sector firms seeing the sharpest rise.

*U.K. AUG. SERVICES PMI RISES TO 60.1; FORECAST 57

*U.K. AUG. MANUFACTURING PMI 55.3; FORECAST 54

Concerns about the speed and duration of the recovery resulted in sustained job cuts across the private sector during August. In contrast to the positive trends for output and new orders, latest data indicated the fastest pace of decline in employment numbers since May.

Lower payroll numbers were primarily attributed to Comment redundancy programmes in response to depleted volumes of work and the need to reduce overheads before the government’s job retention scheme winds down.

UK services & manufacturing PMIs easily beat expectations – signals fastest growth in several years.

BUT… also shows rapid deterioration of labour market and companies are getting increasingly worried about that

Although the UK national debt is now £2bn, larger than the entire economy, Britain does not face a debt crisis.

Currently, the UK can borrow cheaper than ever before. Ten-year government debt is currently trading at a yield, or interest rate, of just 0.22% per year.

“The positive news for the Government is that despite debt reaching £2tn, low interest rates have reduced its cost and its growth is slowing as the exceptional support measures to deal with the pandemic are withdrawn and furloughed employees return to work.

“The big question is how much permanent damage is being done to the economy, with accelerating job losses a concerning sign as we approach the autumn. How quickly debt continues to grow will also depend on any additional support that the Government might provide to sectors that are still struggling.”

Just in: The recovery in the eurozone economy is slowing, with service sector companies reporting slower growth.

Data firm Markit’s latest survey of purchasing managers shows that the economy kept expanding in August after its worst recession ever. However, the pace of improvement weakened, with companies continuing to cut jobs and new business growth fading.

The latest IHS Markit Flash France PMI pointed to stalling growth momentum in the private sector during August. After July’s sharp expansion in activity, the latest increase was modest. Read more: https://t.co/ptsGYxpPJZ pic.twitter.com/HfmNa3UgmD

The latest IHS Markit Flash France PMI pointed to stalling growth momentum in the private sector during August. After July’s sharp expansion in activity, the latest increase was modest. Read more: https://t.co/ptsGYxpPJZ pic.twitter.com/HfmNa3UgmD

There is a tiny glimmer of good news in today’s UK public finances report.

Borrowing in June 2020 was revised down by £6bn to £29.5bn, because tax receipts and National Insurance contributions were actually stronger than the ONS first estimated.

“The government was certainly lacking in good news stories this week, but today’s official borrowing figures show a small win for the Exchequer given June’s borrowing figures were actually less than reported last month due to stronger than expected tax receipts. In addition, retails sales increased 3.6% on the month and are now 3% above pre-pandemic levels in February 2020, but still lag what is expected from a normal July.

“But this does not remove the fact that the UK is officially in a recession, Gfk consumer confidence – a forward indicator of confidence – remains unchanged overnight and now public sector net debt has breached the £2 trillion mark for the first time.

Ruth Gregory, senior UK economist at Capital Economics, says Britain’s record-breaking national debt reflects the ‘extraordinary support’ provided since the pandemic struck:

The £26.7bn the government borrowed in July was the lowest monthly borrowing figure since March as fiscal support started to unwind. Nonetheless, it is another huge sum and pushes borrowing in the year to date to £150.5bn. That is close to the deficit for the whole of 2009/10 of £158.3bn, which was previously the largest cash deficit in history, reflecting the extraordinary fiscal support the government has put in place to see the economy through the crisis.

Overall, today’s figures bode well for consumption in Q3, but now that the initial boost from re-opening has passed and fiscal support measures are being phased out, further increases in high street spending in August and beyond will be more minimal.

We’ve also learned this morning that UK retail sales are now above their levels before the pandemic struck.

The ONS reports that retail sales volumes increased by 3.6% in July when compared with June, and are 3.0% above pre-pandemic levels in February 2020.

Here’s some snap reaction to the news that Britain’s national debt has hit the £2tn mark for the first time:

“Borrowing still set to total about 17% of GDP this year,” says @PantheonMacro. “Public borrowing remains on course this year to hit its highest share of GDP since the Second World War.”

The Chancellor puts the country on notice for some combination of tax rises & spending cuts to come:

“We must return our public finances to a sustainable footing over time, which will require taking difficult decisions”

Sounds almost like a certain George Osborne….

UK public debt has reached £2 trillion for the first time.

Amazingly, borrowing in the first four months of this financial year has been £150.5bn. That’s not far off the £158.3bn borrowed during the whole of 2009-10, the previous record annual cash deficit

UK public debt now £2tn – bigger than current @Apple market cap [$2tn]

July public finance data show record borrowing and debt climbing above £2 trillion (100% of GDP) *as expected*

More interesting point is that actual borrowing continues to come in *below* the OBR’s forecasts (which I think are too pessimistic)… pic.twitter.com/ys21kcNLND

Charlie McCurdy, economist at the Resolution Foundation, says chancellor Rishi Sunak should resist tackling the UK’s debt mountain until the recovery is secured.

“The Government has now borrowed £150 billion since April as a result of the crisis, and efforts to fight it. The national debt has now hit £2 trillion, with more heavy borrowing due as the crisis continues.

“The reopening is the economy is showing signs of having an impact on borrowing though, with the Government spending £6.9 billion in July paying the wages of furloughed workers, down from £8.2bn in June. This 15 per cent fall is smaller than our estimate, based on separate ONS data, that the number of fully furloughed workers fell by around a third over this period, reflecting the introduction of partial furloughing in July.

Rishi Sunak, the UK chancellor, has described today’s borrowing figures as a “stark reminder” that the government must return the public finances to a sustainable footing over time.

He also warns that the Covid-19 crisis has put significant strain on the public finances, due to the hit to the UK economy.

Chancellor @RishiSunak says the pandemic has put the UK public finances “under significant strain” and “difficult decisions” will be needed in time pic.twitter.com/rMgnY0RBOB

Tax receipts fell very sharply last month, forcing the government to borrow heavily to cover the shortfall.

The ONS estimates that central government receipts shrank by 16.7% compared with July 2019 to £56.6bn, including £40.4bn in taxes.

This month, tax revenue on a national accounts basis fell by 23.1% compared with July last year, with Value Added Tax (VAT), Corporation Tax and Pay As You Earn (PAYE) Income Tax receipts falling by 26.2%, 29.8% and 6.2% respectively.

Over the last four months, the UK has nearly borrowed as much as in the 12 months after the financial crisis.

The deficit surged to nearly £160bn in the 2009-2010 financial year, due to the cost of bailing out the banks and handling a deep recession.

This chart shows how Britain’s debt has now hit the £2tn level, and is now larger than the country’s annual economic output (GDP).

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain’s national debt has hit two trillion pounds for the first time, as the cost of fighting the Covid-19 pandemic continues to mount.

The coronavirus (COVID-19) pandemic continues to have a significant impact on the UK public sector finances.

These effects arise from both the introduction of public health measures and from new government policies to support businesses and individuals

Public sector net debt excluding public sector banks was £2,004.0 billion at the end of July 2020, up £227.6 billion on July 2019.

This is the first time it has exceeded £2 trillion pounds https://t.co/wIcfpkX5uy pic.twitter.com/7SYm6aQ0aH

European Opening Calls:#FTSE 6024 +0.18%#DAX 12899 +0.54%#CAC 4938 +0.54%#AEX 554 +0.25%#MIB 19848 +0.41%#IBEX 7030 +0.53%#OMX 1760 +0.49%#STOXX 3289 +0.46%#IGOpeningCall

Continue reading…Rolling coverage of the latest economic and financial news, as the Covid-19 pandemic drives UK government debt to record highsLatest: UK PMI hits near seven-year highBreaking: UK national debt now £2,004bnUK has borrowed £150bn since AprilRishi Sunak: public finances are under strainCoronavirus – latest updatesSee all our coronavirus coverage 9.58am BSTAt first glance, the UK PMI survey for August may look like a V-shaped recovery. But it’s not (at least not yet!). 9.46am BSTSome early reaction to the strong UK PMI report, from Rupert Harrison of BlackRock…UK services PMI stands out as very strong when other European services PMIs are notably weakening. Pretty encouragingMaybe we are a little behind on reopening so still playing catch up. But also probably benefitting from still contained virus data. Need to keep it that way https://t.co/X376OJE4RyA very very odd recession – we’re moving out of the depth of the (first) output part of it, and into the depths of the unemployment part (which will itself then drive the second output hit) https://t.co/FtIwWfBpFYFlash UK composite #PMI (a measure of changes in business activity) much stronger than expected in August – at 60.3. We can debate exactly what this means in terms of levels or growth rates (and employment still weak), but overall it’s clearly good news.#vshapedrecovery pic.twitter.com/bv1sfejn9N 9.38am BSTBreaking: UK companies have reported that growth accelerated in August, but they’re still cutting jobs.IHS Markit’s latest healthcheck on British firms shows activity expanded at the fastest rate since 2013, with service sector firms seeing the sharpest rise.*U.K. AUG. SERVICES PMI RISES TO 60.1; FORECAST 57*U.K. AUG. MANUFACTURING PMI 55.3; FORECAST 54Concerns about the speed and duration of the recovery resulted in sustained job cuts across the private sector during August. In contrast to the positive trends for output and new orders, latest data indicated the fastest pace of decline in employment numbers since May.Lower payroll numbers were primarily attributed to Comment redundancy programmes in response to depleted volumes of work and the need to reduce overheads before the government’s job retention scheme winds down.UK services & manufacturing PMIs easily beat expectations – signals fastest growth in several years. BUT… also shows rapid deterioration of labour market and companies are getting increasingly worried about that 9.22am BSTAlthough the UK national debt is now £2bn, larger than the entire economy, Britain does not face a debt crisis.Currently, the UK can borrow cheaper than ever before. Ten-year government debt is currently trading at a yield, or interest rate, of just 0.22% per year. “The positive news for the Government is that despite debt reaching £2tn, low interest rates have reduced its cost and its growth is slowing as the exceptional support measures to deal with the pandemic are withdrawn and furloughed employees return to work. “The big question is how much permanent damage is being done to the economy, with accelerating job losses a concerning sign as we approach the autumn. How quickly debt continues to grow will also depend on any additional support that the Government might provide to sectors that are still struggling.” 9.10am BSTJust in: The recovery in the eurozone economy is slowing, with service sector companies reporting slower growth.Data firm Markit’s latest survey of purchasing managers shows that the economy kept expanding in August after its worst recession ever. However, the pace of improvement weakened, with companies continuing to cut jobs and new business growth fading.The latest IHS Markit Flash France PMI pointed to stalling growth momentum in the private sector during August. After July’s sharp expansion in activity, the latest increase was modest. Read more: https://t.co/ptsGYxpPJZ pic.twitter.com/HfmNa3UgmDThe latest IHS Markit Flash France PMI pointed to stalling growth momentum in the private sector during August. After July’s sharp expansion in activity, the latest increase was modest. Read more: https://t.co/ptsGYxpPJZ pic.twitter.com/HfmNa3UgmD 8.27am BSTThere is a tiny glimmer of good news in today’s UK public finances report.Borrowing in June 2020 was revised down by £6bn to £29.5bn, because tax receipts and National Insurance contributions were actually stronger than the ONS first estimated. “The government was certainly lacking in good news stories this week, but today’s official borrowing figures show a small win for the Exchequer given June’s borrowing figures were actually less than reported last month due to stronger than expected tax receipts. In addition, retails sales increased 3.6% on the month and are now 3% above pre-pandemic levels in February 2020, but still lag what is expected from a normal July. “But this does not remove the fact that the UK is officially in a recession, Gfk consumer confidence – a forward indicator of confidence – remains unchanged overnight and now public sector net debt has breached the £2 trillion mark for the first time. 8.19am BSTRuth Gregory, senior UK economist at Capital Economics, says Britain’s record-breaking national debt reflects the ‘extraordinary support’ provided since the pandemic struck: The £26.7bn the government borrowed in July was the lowest monthly borrowing figure since March as fiscal support started to unwind. Nonetheless, it is another huge sum and pushes borrowing in the year to date to £150.5bn. That is close to the deficit for the whole of 2009/10 of £158.3bn, which was previously the largest cash deficit in history, reflecting the extraordinary fiscal support the government has put in place to see the economy through the crisis.Overall, today’s figures bode well for consumption in Q3, but now that the initial boost from re-opening has passed and fiscal support measures are being phased out, further increases in high street spending in August and beyond will be more minimal. 8.16am BSTWe’ve also learned this morning that UK retail sales are now above their levels before the pandemic struck.The ONS reports that retail sales volumes increased by 3.6% in July when compared with June, and are 3.0% above pre-pandemic levels in February 2020. 8.03am BSTHere’s some snap reaction to the news that Britain’s national debt has hit the £2tn mark for the first time:”Borrowing still set to total about 17% of GDP this year,” says @PantheonMacro. “Public borrowing remains on course this year to hit its highest share of GDP since the Second World War.”The Chancellor puts the country on notice for some combination of tax rises & spending cuts to come:“We must return our public finances to a sustainable footing over time, which will require taking difficult decisions”Sounds almost like a certain George Osborne….UK public debt has reached £2 trillion for the first time.Amazingly, borrowing in the first four months of this financial year has been £150.5bn. That’s not far off the £158.3bn borrowed during the whole of 2009-10, the previous record annual cash deficitUK public debt now £2tn – bigger than current @Apple market cap [$2tn] July public finance data show record borrowing and debt climbing above £2 trillion (100% of GDP) *as expected* More interesting point is that actual borrowing continues to come in *below* the OBR’s forecasts (which I think are too pessimistic)… pic.twitter.com/ys21kcNLND 7.59am BSTCharlie McCurdy, economist at the Resolution Foundation, says chancellor Rishi Sunak should resist tackling the UK’s debt mountain until the recovery is secured.“The Government has now borrowed £150 billion since April as a result of the crisis, and efforts to fight it. The national debt has now hit £2 trillion, with more heavy borrowing due as the crisis continues.“The reopening is the economy is showing signs of having an impact on borrowing though, with the Government spending £6.9 billion in July paying the wages of furloughed workers, down from £8.2bn in June. This 15 per cent fall is smaller than our estimate, based on separate ONS data, that the number of fully furloughed workers fell by around a third over this period, reflecting the introduction of partial furloughing in July. 7.59am BSTRishi Sunak, the UK chancellor, has described today’s borrowing figures as a “stark reminder” that the government must return the public finances to a sustainable footing over time.He also warns that the Covid-19 crisis has put significant strain on the public finances, due to the hit to the UK economy.Chancellor @RishiSunak says the pandemic has put the UK public finances “under significant strain” and “difficult decisions” will be needed in time pic.twitter.com/rMgnY0RBOB 7.53am BSTTax receipts fell very sharply last month, forcing the government to borrow heavily to cover the shortfall.The ONS estimates that central government receipts shrank by 16.7% compared with July 2019 to £56.6bn, including £40.4bn in taxes.This month, tax revenue on a national accounts basis fell by 23.1% compared with July last year, with Value Added Tax (VAT), Corporation Tax and Pay As You Earn (PAYE) Income Tax receipts falling by 26.2%, 29.8% and 6.2% respectively. 7.46am BSTOver the last four months, the UK has nearly borrowed as much as in the 12 months after the financial crisis.The deficit surged to nearly £160bn in the 2009-2010 financial year, due to the cost of bailing out the banks and handling a deep recession. 7.29am BSTThis chart shows how Britain’s debt has now hit the £2tn level, and is now larger than the country’s annual economic output (GDP). 7.12am BSTGood morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Britain’s national debt has hit two trillion pounds for the first time, as the cost of fighting the Covid-19 pandemic continues to mount.The coronavirus (COVID-19) pandemic continues to have a significant impact on the UK public sector finances.These effects arise from both the introduction of public health measures and from new government policies to support businesses and individuals Public sector net debt excluding public sector banks was £2,004.0 billion at the end of July 2020, up £227.6 billion on July 2019. This is the first time it has exceeded £2 trillion pounds https://t.co/wIcfpkX5uy pic.twitter.com/7SYm6aQ0aHEuropean Opening Calls:#FTSE 6024 +0.18%#DAX 12899 +0.54%#CAC 4938 +0.54%#AEX 554 +0.25%#MIB 19848 +0.41%#IBEX 7030 +0.53%#OMX 1760 +0.49%#STOXX 3289 +0.46%#IGOpeningCall Continue reading…