The UK’s public debt surpassed the £ 2 trillion mark for the first time at the end of July, while at the same time retail sales rose above their pre-pandemic level, announced Friday the National Statistics Office (ONS).
British public finances are deteriorating at high speed due to the cost of the economic aid measures deployed in recent months to deal with the consequences of the pandemic.
Debt stood at precisely 2.004 billion pounds ($ 3,490 billion) last month, up 227.6 billion from a year earlier.
In July, it represented more than 100% of gross domestic product (100.5%) for the first time since 1961.
The government has spent tens of billions of pounds to keep the economy afloat since the lockdown, in particular with the partial unemployment scheme, which is supposed to protect jobs.
At the same time, the brutal recession following the shutdown of activity for weeks considerably reduced tax revenues.
Consequently, the public deficit climbs to new levels, reaching 150.5 billion pounds between April and July. Economists expect it to exceed 300 billion in the 2020-2021 fiscal year (completed at the end of March).
“The crisis has put enormous pressure on public finances as our economy is affected and we take action to support millions of jobs and businesses. Without this help, things would have been much worse, ”notes Finance Minister Rishi Sunak, in a statement released on Friday.
He warns that to get public finances back on track, “difficult decisions” will be necessary, without giving more details.
The government may have no other choice in the long run but to raise taxes or reduce some public spending.
The British economy, however, has probably now passed the worst and activity has started a strong rebound since May with the gradual reopening of shops and factories.
Household consumption has picked up again, as shown by retail sales figures released on Friday by the ONS.
They increased by 3.6% in July over one month, continuing their momentum to the point of now exceeding their level before the pandemic.
The pace of sales growth has slowed sharply, however, compared to the increases recorded in May and June which came after the shock of containment.
In July, retail sales were supported primarily by clothing and fuel, the ONS said.
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