Government borrows almost £15bn more than expected

Published

3 weeks ago

April 23, 2025

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The UK government borrowed almost £15bn more than forecast in the last financial year, according to official figures highlighting contributions from inflation-related costs including pay awards.

The Office for National Statistics (ONS) reported that borrowing – the difference between total public sector spending and income – over the 12 months to the end of March came in at £151.9bn.

That provisional sum was £20.7bn more than in the same twelve-month period a year earlier and £14.6bn more than the £137.3bn forecast by the Office for Budget Responsibility (OBR) at the spring statement just a month ago, the body said.

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It added that the figure represented 5.3% of the UK’s gross domestic product (GDP), 0.5 percentage points more than in 2023/24.

It was partly driven by £16.4bn of borrowing in March – the third-highest March borrowing since monthly records began in 1993.

The provisional data left public sector net debt at 95.8% of GDP at the end of March. That is 0.2 percentage points higher than at the end of March 2024 and remaining at levels last seen in the early 1960s.

Higher borrowing is partly a consequence of government investment and spending decisions announced in the chancellor’s autumn budget last year.

But it is also a result of higher costs to service government debt, with the ONS data showing a bill of £4.3bn for March alone.

Elevated bond yields, which reflect a higher risk premium demanded by investors in return for holding UK government debt, are a result of greater turmoil in the global economy and unease over domestically-generated inflation and weak growth at a time of continued strain for the public purse.

Rachel Reeves was forced to use her spring statement in March to restore a £10bn buffer to the public finances to avoid breaking her own fiscal rules.

ONS chief economist Grant Fitzner said of the data: “Our initial estimates suggest public sector borrowing rose almost £21bn in the financial year just ended as, despite a substantial boost in income, expenditure rose by more, largely due to inflation-related costs, including higher pay and benefit increases.

“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”

The government’s efforts to bring down costs include a crackdown on the welfare bill and a renewed focus on securing growth in the economy.

However, business groups say the chancellor’s decision to impose an additional tax burden on employment from this month, mainly through higher minimum wage and employer national insurance contributions, will backfire and harm both employment and investment.

Household spending power is also set to face further strain as inflation is tipped to rise beyond 3% due to a slew of rising costs in the economy, including bills for energy and water.

The impact of the US trade war is also starting to be felt.

A closely-watched index of activity in the service and manufacturing sectors fell into negative territory with its weakest reading since November 2022.

The survey of purchasing managers by S&P Global found export orders falling at their fastest pace since early 2020.

AJ Bell head of financial analysis, Danni Hewson, said of the data: “Many of the challenges facing the UK economy are beyond the chancellor’s control and she is currently in Washington trying to strike a deal with the US administration on tariffs that will cushion the UK without selling off the family silver.

“One of the big questions is how those changes to employer National Insurance will impact next month’s numbers, especially with inflation linked benefits and the state pension rising at the same time.

“Many people will now be eyeing that headroom created back in March which had always seemed rather insubstantial, and wondering how much will be left by the autumn.”

Responding to the figures, Chief Secretary to the Treasury Darren Jones said the government would always be responsible when it came to the public finances.

He added: “We are laser-focused on making sure taxpayer money is delivering our Plan for Change missions to put more money in people’s pockets, rebuild the NHS and strengthen our borders.”

But shadow chancellor Mel Stride said: “By fiddling the fiscal rules, increasing borrowing by £30bn a year and piling up debt – these figures are alarming but not surprising.”

Business

UK economy grows more than expected, according to official figures

Published

10 hours ago

May 15, 2025

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UK economy grows more than expected, according to official figures

The UK economy showed strong growth in the first three months of the year, according to official figures.

Gross domestic product (GDP) – the standard measure of an economy’s value – grew 0.7% in the first quarter of 2025, the Office for National Statistics said.

The rise is better than expected. An increase of just 0.6% was anticipated by economists polled by the Reuters news agency.

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It’s significantly better than the three months previous, in which a slight economic expansion of just 0.1% was reported for the final quarter of 2024.

The ONS also said there was a small amount of growth last month, as GDP expanded 0.2% in March, which similarly beat expectations.

No growth at all had been forecast for the month.

How did the economy grow?

A large contribution to high GDP growth was an increase in output in the production sector, which rose 1.1%, driven by manufacturing and a 4% increase in water supply, the ONS said.

Also working to push up the GDP figure was 0.7% growth in the biggest part of the UK economy – the services industry.

Wholesale, retail and computer programming services all performed well in the quarter, as did car leasing and advertising, the ONS said.

It shows the economy was resilient, as the country headed into the global trade war sparked by President Trump’s so-called ‘liberation day’ tariff announcement on 2 April.

Welcome political news, for now

The data is welcome news for a government who have identified growing the economy as its number one priority.

Chancellor Rachel Reeves is taking the figures as a political win, saying the UK economy has grown faster than the US, Canada, France, Italy and Germany.

“Today’s growth figures show the strength and potential of the UK economy, ” she said.

“Up against a backdrop of global uncertainty, we are making the right choices now in the national interest.”

Such GDP numbers may not continue into April as businesses and consumers were hit with a raft of bill rises, and Mr Trump’s tariffs fired the starting gun on a global trade war.

Last month, water, energy and council tax bills rose across the country while employers faced higher wage costs from the rise in their national insurance contributions and the minimum wage.

But above-inflation wage growth and fading consumer caution could continue to boost the economy.

Business

Foreign states face 15% newspaper ownership limit amid Telegraph row

Published

1 day ago

May 14, 2025

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Foreign states face 15% newspaper ownership limit amid Telegraph row

Foreign state investors would be allowed to hold stakes of up to 15% in British national newspapers, ministers are set to announce amid a two-year battle to resolve an impasse over The Daily Telegraph’s ownership.

Sky News has learnt that the Department for Culture, Media and Sport could announce as soon as Thursday that the new limit is to be imposed following a consultation lasting several months.

The decision to set the ownership threshold at 15% follows an intensive lobbying campaign by newspaper industry executives concerned that a permanent outright ban could cut off a vital source of funding to an already-embattled industry.

It would mean that RedBird IMI, the Abu Dhabi state-backed fund which owns an option to take full ownership of the Telegraph titles, would be able to play a role in the newspapers’ future.

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RedBird Capital, the US-based fund, has already said it is exploring the possibility of taking full control of the Telegraph, while IMI would have – if the status quo had been maintained – forced to relinquish any involvement in the right-leaning broadsheets.

One industry source said they had been told to expect a statement from Lisa Nandy, the culture secretary, or another DCMS minister, this week, with the amendment potentially being made in the form of a statutory instrument.

Other than RedBird, a number of suitors for the Telegraph have expressed interest but struggled to raise the funding for a deal.

The most notable of these has been Dovid Efune, owner of The New York Sun, who has been trying for months to raise the £550m sought by RedBird IMI to recoup its outlay.

Another potential offer from Todd Boehly, the Chelsea Football Club co-owner, and media tycoon David Montgomery, has yet to materialise.

RedBird IMI paid £600m in 2023 to acquire a call option that was intended to convert into ownership of the Telegraph newspapers and The Spectator magazine.

That objective was thwarted by a change in media ownership laws – which banned any form of foreign state ownership – amid an outcry from parliamentarians.

The Spectator was then sold last year for £100m to Sir Paul Marshall, the hedge fund billionaire, who has installed Lord Gove, the former cabinet minister, as its editor.

The UAE-based IMI, which is controlled by the UAE’s deputy prime minister and ultimate owner of Manchester City Football Club, Sheikh Mansour bin Zayed Al Nahyan, extended a further £600m to the Barclays to pay off a loan owed to Lloyds Banking Group, with the balance secured against other family-controlled assets.

Other bidders for the Telegraph had included Lord Saatchi, the former advertising mogul, who offered £350m, while Lord Rothermere, the Daily Mail proprietor, pulled out of the bidding last summer amid concerns that he would be blocked on competition grounds.

The Telegraph’s ownership had been left in limbo by a decision taken by Lloyds Banking Group, the principal lender to the Barclay family, to force some of the newspapers’ related corporate entities into a form of insolvency proceedings.

The newspaper auction is being run by Raine Group and Robey Warshaw.

The DCMS declined to comment.

Business

Burberry to cut 1,700 jobs after multi-million pound loss

Published

1 day ago

May 14, 2025

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Burberry to cut 1,700 jobs after multi-million pound loss

Burberry, the UK’s only global luxury brand, is to cut around 1,700 jobs worldwide over the next two years after reporting a steep financial loss.

The company lost £66m in pre-tax profit in the year ended in March as luxury goods sales fell across the world and the company weathered an “uncertain” environment and a “difficult macroeconomic backdrop”.

A year earlier, it recorded £383m in profit.

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It’s suffered in recent years with the share price falling to such an extent the business was removed from the FTSE 100, the index of most valuable companies listed on the London Stock Exchange.

Despite the financial performance, the company was upbeat, with chief executive Joshua Schulman saying “I am more optimistic than ever that Burberry’s best days are ahead and that we will deliver sustainable profitable growth over time”.

What cuts are being made?

The retailer did not specify any shop closures – in the past year, it closed 26 and also opened 26 stores – but did highlight shift cuts and consolidations.

“We don’t have a store closing programme, per see,” Mr Schulman told investors

The night shift at Burberry’s Castleford factory will be cut, it proposed, saying the shift has resulted in overproduction.

“Significant” investment in the facility will be made, however, as the ambition is to scale up British production “over time”, Mr Schulman said.

Changes to the retail network across the world will be made with shop staff being scheduled around “peak traffic”.

Burberry will be “realigning” shop staff, he said, “so that we can offer the best service” at the busiest times.

There will also be a “simplification” of Burberry’s regional structure and a “rebalancing” of central and regional responsibilities to reduce duplication and “accelerate decision making” through the retail network.

But the majority of changes will be made to “office space teams” around the world, the CEO said.

Commercial and creative teams have already been consolidated, Burberry’s annual results said.

What’s gone wrong?

Aside from the global slowdown in luxury goods sales over recession fears, additional headwinds have come in the form of President Trump’s tariffs.

“Clearly, the external environment has become more challenging since mid-February”, Mr Schulman told investors.

Tariff risks were higher than first planned, the annual results said.

It led the US market to be described by Mr Schulman as “choppy” since February when Mr Trump began announcing tariffs on Mexico, Canada and China, as well as on goods such as steel and cars.

Sales also fell in the Asia Pacific region by 16%, the results showed.

Criticism was levelled at the 2021 British government decision to withdraw VAT refunds for overseas visitors, “which has made the UK the least competitive destination in Europe for tourist shopping”, the results read.

“Business in our UK home market continues to be seriously impacted” by the move.