U.K.’s Huge Public Borrowing Falls in June, Debt Costs Rise

British public borrowing last month was almost a fifth lower than a year earlier, when the economy was feeling the full force of the coronavirus pandemic, but rising inflation put upward pressure on debt costs, Reuters reported. Public sector net borrowing, excluding public sector banks, fell to 22.8 billion pounds ($31.0 billion) in June, still the second-highest June figure on record. Economists had forecast a drop to 21.6 billion pounds. Reflecting the surge in borrowing by British finance minister Rishi Sunak to soften the hit from the pandemic, the data showed that Britain's budget deficit leapt to 14.2 percent of gross domestic product during the financial year to the end of March 2021, its highest share of GDP since World War II. The Institute for Fiscal Studies said in a report with economists from Citi that borrowing in the 2021-22 financial year would drop to 9.3% of GDP. This is 30 billion pounds less than the government's forecasters expected in March but would still be the third-highest on record. The Office for National Statistics said June's debt-servicing costs rose to a record 8.7 billion pounds. A rise in the rate of retail price inflation was largely to blame, it added. However, debt-servicing costs as a share of GDP remain low by historic standards, and most economists say the pace of economic recovery will be the key factor in improving the public finances. Read more.