2018.07.2009:00:00UTC+00UK June Budget Deficit Smallest In 2 Years

The UK budget deficit narrowed in June on higher revenue and lower expenditure and public borrowing for the quarter ended June reached its lowest level since 2007, the Office for National Statistics reported Friday.

Public sector net borrowing, excluding public sector banks, dropped by GBP 0.8 billion to GBP 5.4 billion. This was the lowest June net borrowing since 2016. Nonetheless, PSNB was bigger than the expected GBP 5 billion.

The decrease in budget deficit reflects a GBP 1.5 billion rise in revenue and a GBP 1.9 billion decrease in government expenditure.

PSNB for the current financial year-to-date period fell by GBP 5.4 billion from last year to GBP 16.8 billion, which was the lowest net borrowing for April to June period since 2007.

Of the GBP 16.8 billion borrowed by the public sector, GBP 19.4 billion was borrowed by central government, while local government borrowing was in surplus by GBP 2.9 billion.

In March, the Office for Budget Responsibility had estimated a budget deficit of GBP 37.1 billion, or 1.8 percent of GDP for the FY 2018-19.

Andrew Wishart, an economist at Capital Economics, said government borrowing is still on track to undershoot the OBR's 2018/19 forecast. As such, it seems likely that the Chancellor will have a bit more room for manoeuvre in the Autumn Budget.

Data showed that public sector net debt was GBP 1.79 trillion at the end of June 2018, equivalent to 85.2 percent of gross domestic product. Excluding the effect of Bank of England stimulus scheme, net debt was equivalent to 76.1 percent of GDP.