As inflation rises, the cost of debt service in the UK hits a record high-Business Facts |

Good morning, and welcome to our rolling reports on the world economy, financial markets, the Eurozone and business.

As the economy continued to recover from the impact of the pandemic, British government borrowing fell in June…but interest payments on national debt were pushed up by rising inflation.

Announced figures National Bureau of Statisticssecond Data this morning showed that net public sector borrowing (excluding public sector bank costs) fell to 22.8 billion pounds last month.

This is a decrease of 5.5 billion pounds from June 2020, but it is still the second highest June borrowing since the start of monthly records in 1993.

The Office for National Statistics reported that after some economic sectors were reopened earlier this year, tax revenues in June were stronger than a year ago:

Central government revenue in June 2021 is estimated at 62.2 billion pounds, an increase of 9.5 billion pounds (or 18.0%) from June 2020. Of these revenues, taxes increased by £8.1 billion (or 21.7%) to £45.5 billion.

The Office for National Statistics said that the increase in public spending was partly due to the cost of fighting the pandemic:

In June 2021, the central government’s expenditure on goods and services was 31.1 billion pounds, an increase of 1.7 billion pounds (or 5.7%), including 17.7 billion pounds in purchases and 12.8 billion pounds in salaries.

This cost includes expenditures by the Ministry of Health and Social Care (DHSC), decentralized administration and other departments to respond to the coronavirus pandemic, including NHS testing and tracking programs and vaccine costs.

So far, borrowings this fiscal year have also been lower than the first wave of Covid-19.

Since April, the government has borrowed about 69.5 billion pounds to balance the accounts-a decrease of 49.8 billion pounds from the same period last year (but also the second highest on record for borrowings from April to June).

Last year’s record borrowings have also been revised downwards—a decrease of 1.5 billion pounds to an unprecedented 297.7 billion pounds (the highest borrowing since the beginning of the fiscal year record in 1946).

This means that the national debt is now £2.2182 billion-about 99.7% of UK GDP, which is the highest ratio since the 102.5% recorded in March 1961.

The report also showed that interest payments on central government debt in June 2021 were GBP 8.7 billion, the highest monthly payment on record (since April 1997)-higher than the GBP 2.7 billion in June 2020.

This is mainly due to the fact that the retail price index (RPI) measures the rise in inflation and is linked to the index-linked Phnom Penh bonds (government bonds).

ONS explained:

Compared with June 2021, in June 2021, the interest related to the 470.7 billion pounds of index-linked Treasury bonds (calculated by redemption value) increased by 6 billion pounds, mainly due to RPI’s March to April 2021 The sharp rise during the period affected the rise of the three-month lagging index-linked Phnom Penh bonds.

Public sector financial statistician Fraser Monroe There are more details:

Follow-up response…

Following the sharp drop on Monday and a slight rebound yesterday, European stock markets will open slightly higher.

Agenda

• 7 AM BST: UK Public Finance in June
• Noon BST: U.S. weekly mortgage approval
• BST 2.30 pm: The Finance Committee holds a hearing on the fiscal risk report of the Office of Budget Accountability
• BST 3.30 pm: IEA weekly US oil inventory data