UK debt rises to £2.3tn – equal to 99.6% of GDP

·Business Reporter, Yahoo Finance UK
·2-min read
Big Ben and the houses of parliament in Westminster. UK general government gross debt came in at £2.3tn
Compared to other member states, the UK ranked eighth highest for general government gross debt as a percentage of GDP. Photo: John Sibley/Reuters

UK general government gross debt came in at £2.3tn ($2.8tn) at the end of the first quarter of the year — equivalent to 99.6% of gross domestic product (GDP).

According to the Office for National Statistics (ONS) on Friday, this was 11.8 percentage points above the EU average.

Compared to other member states, the UK ranked eighth highest for general government gross debt as a percentage of GDP.

Greece, Italy and Portugal came out on top, with the highest rankings, followed by Spain, France, Belgium, and Cyprus.

Estonia, Luxembourg and Bulgaria where the countries with the smallest ratios.

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Meanwhile, the UK government deficit, or net borrowing, was £15.8bn during the period. This was equal to 2.6% of GDP.

Debt as a percentage of GDP in Q1 was 4.2 percentage points lower than in the same period in 2021, but 16.8 percentage points more than in the first three months of 2019, before the coronavirus pandemic.

It comes as a record interest bill drove the budget deficit up to £22.9bn last month, the second highest June since records began in 1993.

The Office for National Statistics (ONS) said last week that borrowing was £4.1bn higher in June than the same month a year before. It also overshot the Office for Budget Responsibility (OBR) forecast by £600m.

Debt interest payments, which are being pushed up by inflation on the huge stock of index-linked government bonds, hit an all-time high of £19.4bn in worse-than-expected figures. That's more than double the previous monthly record.

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A quarter of the UK’s government debt is index-linked, so the cost of servicing it is pushed up by inflation, which is running at a 40-year high.

The UK fiscal watchdog had forecast interest payments would rise to £19.7bn in June — slightly more than the actual figure — before dropping back to £3.9bn in July.

The worsening UK public finance figures make it harder for the new chancellor, and any new prime minister, to cut taxes to ease the cost of living squeeze.

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