Shock UK borrowing figures prompt country risk score fall
Economic risk increases as official statistics reveal higher than expected borrowing in July
The U.K’s overall ECR score decreased by 0.2 points to 74.2, following news that the government borrowed £600 billion in total for July, £3.4bn more than last year’s level.
On the back of the news both the U.K’s political and economic assessment scores fell by 0.1 points, due to increased risk across the U.K’s monetary policy/ currency stability and government stability indicators.
However the sovereign’s employment indicator showed a reversal to the trend increasing by 0.1 point from July 2012 as unemployment figures for the UK, released last week, showed a drop of 46,000 to 2.56 million, from June 2012.
A lower than expected corporation tax intake was to blame for the government’s high borrowing rates, with the government reportedly receiving 0.8% less in corporation tax receipts.
Philip Rush of Nomura, a member of Euromoney Country Risk’s Expert panel for the UK, writes: “Weak growth naturally starves the public finances of receipts. As such, we still expect the OBR [Office for Budget Responsibility] to revise up its forecast for borrowing and believe the government will eventually have to announce more fiscal measures in order to meet its fiscal mandate. The secondary fiscal mandate (to have debt to GDP on a downward trajectory by the end of the parliament) already looks like a lost cause”.