UK government borrows £22bn in record for November amid energy crisis – business live | Business

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Steven Morris

The FTSE 100 has now gained a few more points, and is up 0.4% today to 7,401.

Among today’s leaders are trainer retailers JD Sports and Frasers, the artist formerly known as Sports Direct. JD Sports has gained 6.7%, while Frasers is up 3%.

They have benefited from the read-across from US trainer brand Nike, which reported increased sales overnight.

Victoria Scholar, head of investment at interactive investor, a platform, said:

Although the environment is difficult with pressures from rising inventory levels, supply chain issues, a consumer slowdown and cost inflation, Nike has proved that the sheer force of its brand and the strength of its product line are resilient to the challenging macroeconomic headwinds that have plagued US retail this year.

Nike has been offering attractive discounts to lure customers and reduce inventory, however these price reductions have been weighing on margins. It has also been struggling in China, its third biggest market for sales.

Shares in Nike have had a tough time this year, shedding 37% before the after-hours jump amid a tough backdrop for equities and the consumer.

Twitter update: Elon Musk confirms he will seek a replacement as boss

The ONS said its figure on the cost of energy bills support for households and businesses was an “initial indicative estimate”, so there could be big revisions in the data in future months, points out Martin Beck, chief economic adviser to the EY ITEM Club, an economic forecaster.

He said the November record was “largely due to the cost of the government’s energy support programmes”.

The figures so far imply that borrowing could actually undershoot the OBR’s full-year forecast of £177bn, Beck said. However, he added:

It is almost impossible to be confident about this, given the uncertainty around the future path of energy prices – and, therefore, the cost of the energy price guarantee – and the lack of a monthly OBR forecast to benchmark against.

The £500 increase in the energy price guarantee from next April and the government’s decision not to continue universal support for households and businesses means that the cost of the energy support schemes should be much lower in fiscal year 2023-24. Therefore, the EY ITEM Club expects that beyond the current fiscal year, public sector borrowing should steadily reduce.

Jeremy Hunt has a lot of important public finances decisions ahead, says the Institute of Chartered Accounts (ICAEW). Not least: what is going to happen to support for businesses beyond April?

Alison Ring, public sector and taxation director for ICAEW, also raised concern about lower investment in the year so far compared with 2021. The ONS said net investment in the first 11 months of 2022 was £34.4bn, £1bn less than the year before.

She said:

Chancellor Jeremy Hunt will be relieved that the deficit for the year-to-date only exceeded £100bn by £5bn, on track to stay within the Office for Budget Responsibility’s latest forecast of £177bn for the full year.

The continued slow-down in public capital investment is concerning given its importance to economic growth prospects and future tax revenues, compounded by continued disruption from industrial action.

We’re pleased that the chancellor has announced a spring budget and accompanying independent fiscal forecast on 15 March 2023, as this will be the first official budget for 18 months. However, it is important that HM Treasury sets out the terms of the energy bill relief scheme extension from April 2023 as soon as possible, as waiting until March could be too late for many businesses trying to work out whether they can be viable in 2023.

The UK government’s £22bn borrowing in November was signficantly higher than the £13bn expected by economists polled by Reuters.

There are several policy decisions that are all working together to push up borrowing, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics, a consultancy.

Public borrowing was boosted in November by the government’s energy and cost of living interventions, the decision to reverse April’s national insurance hike, and high inflation.

The energy bills support scheme cost the government £1.9bn in November, while the energy price guarantee was the main driver of a £4.7bn year-over-year rise in subsidies. In addition, social assistance payments were £3.3bn higher than a year ago, reflecting the payment of the second cost of living grants to working-age benefit recipients.

Divya Sridhar, an economist at PwC, an accoutancy firm, said:

Looking ahead, continued energy bills support and the ninth consecutive rise in interest rates announced by the Bank of England last week will continue to squeeze public finances. The Office for Budget Responsibility (OBR) has revised its borrowing forecasts up by £64.2bn in financial year 2022-23 and £39.8bn in 2023-24 from their view at Q1 2022.

In the medium-term though, with a recovering economy and rising taxes, the OBR expects net government debt as a proportion of GDP to continue to remain close to 100% of GDP until 2025-26 before starting to fall.

More on the public finances shortly, but it’s looking like a fairly gentle open on Europe’s stock markets today.

Trading is usually relatively subdued in the days leading up to Christmas for obvious reasons. The opening bids have pushed the FTSE 100 up by 0.2%.

Here are the opening snaps from Europe’s market, via Reuters:

• EUROPE’S STOXX 600 .STOXX UP 0.3%

• FRANCE’S CAC 40 UP 0.2%, SPAIN’S IBEX UP 0.4%

• EURO STOXX INDEX UP 0.2%; EURO ZONE BLUE CHIPS UP 0.2%

• GERMANY’S DAX UP 0.4%

Jeremy Hunt, the chancellor, has reaffirmed his position that the UK is facing “tough decisions” to reduce government borrowing.

The prospect of increased borrowing (via big but unspecified tax cuts) was one of the key factors in the rapid removal of Liz Truss and Kwasi Kwarteng as prime minister and chancellor in October after less than two months. Hunt was brought in to steady the ship – a task he has essentially argued requires a programme of deficit reduction to rival the early years of the Conservative government.

Hunt on Wednesday said:

Faced with the twin global emergencies of a pandemic and Putin’s war in Ukraine, we have taken significant action to support millions of businesses and families here in the UK.

We have a clear plan to help halve inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing.

UK government borrows record £22bn in November