UK public sector borrowing hits record high

UK public borrowing rose to a record high in August, at £15.9bn, dwarfing the £12.51bn economists had predicted.

The figure is the largest August deficit since records began in 1993, and casts serious doubt on the strength of public finances.

The Budget deficit was £13.3bn in August, while net debt excluding the effects of financial interventions was £823.3bn, or 56.3% of GDP.

Sterling did not move in response to the data, suggesting markets are convinced by the coalition Government's plans to cut the deficit.

Mark Bolsom, head of the UK trading desk at Travelex Global Business Payments, says: "Tax receipts are still rising so Chancellor Osborne won't have to revise his current borrowing forecasts yet, although he will be disappointed by the overshoot.

"While the data is concerning, the fact that sterling barely reacted suggests that the markets are reassured by the Coalition's promises to reduce public borrowing."

Samuel Tombs, a UK economist at Capital Economics, says at £3bn more than the consensus forecast, the August borrowing figure is worrying.

"This morning's UK public finances severely dent hopes that the fiscal position is on a clearly improving trend," he says. "Admittedly, a seasonal collapse in corporation tax receipts usually means borrowing is pretty hefty in August.

"But August's overshoot clearly casts some doubt on the ability of the government to meet the June Budget projection of annual borrowing of £149bn on that measure. What's more, given that GDP growth in the second quarter was much stronger than the OBR forecast in the June Budget, the figures are all the more the concerning."