Government borrows almost £15bn more than expected

Published

3 months 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

US trade war: The state of play as Trump signs order imposing new tariffs – but there are more delays

Published

5 hours ago

August 1, 2025

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US trade war: The state of play as Trump signs order imposing new tariffs - but there are more delays

Donald Trump’s trade war has been difficult to keep up with, to put it mildly.

For all the threats and bluster of the US election campaign last year to the on-off implementation of trade tariffs – and more threats – since he returned to the White House in January, the president‘s protectionist agenda has been haphazard.

Trading partners, export-focused firms, customs agents and even his own trade team have had a lot on their plates as deadlines were imposed – and then retracted – and the tariff numbers tinkered.

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While the UK was the first country to secure a truce of sorts, described as a “deal”, the vast majority of nations have failed to secure any agreement.

Deal or no deal, no country is on better trading terms with the United States than it was when Trump 2.0 began.

Here, we examine what nations and blocs are on the hook for, and the potential consequences, as Mr Trump’s suspended “reciprocal” tariffs prepare to take effect. That will now not happen until 7 August.

Why was 1 August such an important date?

To understand the present day, we must first wind the clock back to early April.

Then, Mr Trump proudly showed off a board in the White House Rose Garden containing a list of countries and the tariffs they would immediately face in retaliation for the rates they impose on US-made goods. He called it “liberation day”.

The tariff numbers were big and financial markets took fright.

Just days later, the president announced a 90-day pause in those rates for all countries except China, to allow for negotiations.

The initial deadline of 9 July was then extended again to 1 August. Late on 31 July, Mr Trump signed the executive order but said that the tariff rates would not kick in for seven additional days to allow for the orders to be fully communicated.

Since April, only eight countries or trading blocs have agreed “deals” to limit the reciprocal tariffs and – in some cases – sectoral tariffs already in place.

Who has agreed a deal over the past 120 days?

The UK, Japan, Indonesia, the European Union and South Korea are among the eight to be facing lower rates than had been threatened back in April.

China has not really done a deal but it is no longer facing punitive tariffs above 100%.

Its decision to retaliate against US levies prompted a truce level to be agreed between the pair, pending further talks.

There’s a backlash against the EU over its deal, with many national leaders accusing the European Commission of giving in too easily. A broad 15% rate is to apply, down from the threatened 30%, while the bloc has also committed to US investment and to pay for US-produced natural gas.

Where does the UK stand?

We’ve already mentioned that the UK was the first to avert the worst of what was threatened.

While a 10% baseline tariff covers the vast majority of the goods we send to the US, aerospace products are exempt.

Our steel sector has not been subjected to Trump’s 50% tariffs and has been facing down a 25% rate. The government announced on Thursday that it would not apply under the terms of a quota system.

UK car exports were on a 25% rate until the end of June when the deal agreed in May took that down to 10% under a similar quota arrangement that exempts the first 100,000 cars from a levy.

Who has not done a deal?

Canada is among the big names facing a 35% baseline tariff rate. That is up from 25% and covers all goods not subject to a US-Mexico-Canada trade agreement that involves rules of origin.

America is its biggest export market and it has long been in Trump’s sights.

Mexico, another country deeply ingrained in the US supply chain, is facing a 30% rate but has been given an extra 90 days to secure a deal.

Brazil is facing a 50% rate. For India, it’s 25%.

What are the consequences?

This is where it all gets a bit woolly – for good reasons.

The trade war is unprecedented in scale, given the global nature of modern business.

It takes time for official statistics to catch up, especially when tariff rates chop and change so much.

Any duties on exports to the United States are a threat to company sales and economic growth alike – in both the US and the rest of the world. Many carmakers, for example, have refused to offer guidance on their outlooks for revenue and profits.

Apple warned on Thursday night that US tariffs would add $1.1bn of costs in the three months to September alone.

Barriers to business are never good but the International Monetary Fund earlier this week raised its forecast for global economic growth this year from 2.8% to 3%.

Some of that increase can be explained by the deals involving major economies, including Japan, the EU and UK.

US growth figures have been skewed by the rush to beat import tariffs.

The big risk ahead?

It’s a self-inflicted wound.

The elephant in the room is inflation. Countries imposing duties on their imports force the recipient of those goods to foot the additional bill. Do the buyers swallow it or pass it on?

The latest US data contained strong evidence that tariff charges were now making their way down the country’s supply chains, threatening to squeeze American consumers in the months ahead.

It’s why the US central bank has been refusing demands from Mr Trump to cut interest rates. You don’t slow the pace of price rises by making borrowing costs cheaper.

A prolonged period of higher inflation would not go down well with US businesses or voters. It’s why financial markets have followed a recent trend known as TACO, helping stock markets remain at record levels.

The belief is that Trump always chickens out. He may have to back down if inflation takes off.

Business

Trump’s tariffs are back – here’s who is in his sights this time

Published

8 hours ago

August 1, 2025

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'A BIG DAY FOR AMERICA!!!' - Trump's tariffs are back, and will affect dozens of countries

It is “Liberation Day” III – the third tariff deadline set by Donald Trump.

Countries without bilateral trade agreements will soon face reciprocal tariffs – ranging from 25% to 50% – with a baseline of 15% to 20% for any not making a deal.

He has delayed twice, from April to July and from July to August, but hammered this date home in his trademark caps-on style: “THE AUGUST FIRST DEADLINE STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!!”

“Will not be extended” for anyone but Mexico, it seems. The country secured a 90-day extension at the last minute, with Mr Trump citing the “complexities” of the border.

By close of business on the eve of deadline, he had a handful of framework deals – some significant – including the UK (10%), the EU, Japan and South Korea (15%), Indonesia and the Philippines (19%), Vietnam (20%).

On the EU agreement, which he struck in Scotland, the president said: “It’s a very powerful deal, it’s a big deal, it’s the biggest of all the deals.”

But what happened to the “90 deals in 90 days” touted by the White House earlier this year?

The short answer is they were replaced by letters of instruction to pay a tariff set by the US.

Amid of flurry of late activity, the US played hardball with major trading partners like Canada.

“For the rest of the world, we’re going to have things done by Friday,” said US Commerce Secretary Howard Lutnick – the “rest of the world” meaning everyone but China.

There is, apparently, the “framework of a deal” between the world’s two largest economies, but talks between Washington and Beijing are continuing.

In terms of wins, he can claim some significant deals and point to his tariffs having generated an impressive $27bn (£20.4bn) in June, not bad for a single month.

But the legality of the approach is under siege – with the US Court of International Trade ruling that the “Liberation Day” tariffs exceeded the president’s authority, with enforcement paused pending appeal.

The deadline has stirred the pot, forcing a handful of deals onto the table. Whether they stick or survive legal scrutiny is far from settled.

But the playbook remains the same – threaten the world with trade chaos, whittle it down, celebrate the wins, and pray no one checks what’s legal.

Business

Microsoft is now worth over $4 trn, becoming only second firm ever to pass milestone

Published

20 hours ago

July 31, 2025

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Microsoft has become only the second publicly traded company after Nvidia to surpass $4 trn (£3.03trn) in market valuation, after registering huge earnings.

On Thursday, shares rose on Wall Street with the S&P 500 and Nasdaq climbing to new record highs.

Stocks in Microsoft jumped after posting better-than-expected results, helped by its Azure cloud computing platform, which is a centrepiece of the company’s artificial intelligence (AI) efforts.

Shares in Facebook and Instagram’s parent company, Meta, also surged after beating sales and profit targets.

Technology giants Apple and Amazon will report their results after Wall Street’s close.

Microsoft first cracked the $1trn (£760bn) mark in April 2019, but its move to $3trn (£2.27trn) took longer than technology giants Nvidia and Apple.

Nvidia tripled its value in just about a year and clinched the $4trn milestone before any other company on 9 July. Apple was last valued at $3.12trn.

In comparison, the biggest UK company by market value is drug manufacturer AstraZeneca, worth $235.97bn (£178.55bn).

Companies ranked by market value (USD), according to tradingview.com

1. Nvidia (US) $4.43trn
2. Microsoft (US) $4trn
3. Apple (US) $3.12trn
4. Amazon (US) $2.47trn
5. Alphabet (US) $2.35trn
6. Meta (US) $1.95trn
7. Saudi Arabian Oil (Saudi Arabia) $1.56trn
8. Broadcom (US) $1.42trn
9. Berkshire Hathaway (US) $1.03trn
10. Tesla (US) $1.02trn
11. Taiwan Semiconductor Manufacturing (Taiwan) $1trn
29. Samsung Electronics (South Korea) $338.06bn
36. Alibaba (China) $284.62bn
52. AstraZeneca (UK) $235.97bn

While sweeping US tariffs had investors worried about tighter business spending, Microsoft’s strong earnings have shown that the company’s books are yet to take a hit.

Microsoft’s multibillion-dollar bet on OpenAI is proving to be a game changer, powering its Office Suite and Azure offerings with cutting-edge AI and fueling the stock to more than double its value since ChatGPT’s late-2022 debut.