UK sells £1.1bn NatWest stake as government borrowing hits £19bn

·Senior City Correspondent, Yahoo Finance UK
·3-min read
UK's chancellor Rishi Sunak visits a vaccination centre set up at Crystal Palace Football Club in south London. Photo: HM Treasury/Flickr
UK's chancellor Rishi Sunak visits a vaccination centre set up at Crystal Palace Football Club in south London. Photo: HM Treasury/Flickr

The UK government has raised £1.1bn ($1.5bn) selling down its stake in NatWest Group (NWG.L), as official figures once again highlight the perilous state of public finances.

The Treasury said on Friday it had sold £1.1bn worth of NatWest shares back to the bank in an off-market purchase. Shares were sold at 190.5p, inline with Thursday's closing market price. Shares in NatWest rose half a percent in London on the news.

The sale reduces the government's ownership of NatWest from 61.7% to 59.8%. The government acquired the significant stake through a bailout of what was then Royal Bank of Scotland during the 2007/8 financial crisis.

The government's share sale was disclosed at the same time as official borrowing figures, which showed COVID-19 was still forcing the state to borrow astronomical sums.

The Office for National Statistics on Friday said government borrowing hit £19.1bn in February — the highest total for that month since records began. It followed a lower than expected total in January.

COVID led to a £1.5bn reduction in UK tax receipts last month, while the government's response to the pandemic pushed up spending by £14.2bn. The state spent £3.9bn on furlough alone in February.

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"Coronavirus has caused one of the largest economic shocks this country has ever faced, which is why we responded with our £352bn package of support to protect lives and livelihoods," chancellor Rishi Sunak said in a statement.

“This was the fiscally responsible thing to do and the best way to support the public finances in the medium-term.

“But I have always said that we should look to return the public finances to a more sustainable path once the economy has recovered and at the Budget I set out how we will begin to do just that, providing families and businesses with certainty.”

While February's borrowing figure was a record high, the total was in fact lower than economists had forecast. The ONS's estimate of borrowing from April 2020 until January 2021 was also revised down by about £4bn.

The revision means the UK is on-track to undershoot the worst-case-scenario of borrowing £400bn this financial year, which the Office for Budget Responsibility (OBR) had warned could be a possibility.

"Borrowing has totalled £285.9bn between April and February and will total £309.6bn in 2020/21 as a whole, if the year-over-year rise in borrowing in March matches the average uplift in the previous three months," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. "We doubt, however, that borrowing will come in below the OBR’s expectations in future years."

The UK's national debt stood at £2.13tn at the end of February, according to the ONS. That equalled 97.5% of UK GDP "maintaining a level not seen since the early 1960s," the ONS said. 

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