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The British start spending again as public borrowing hits record levels

19 Jun 2020 02:35 PM

The British bought much more than expected in May, with the country gradually easing its lockdown as online retailing flourished in tandem, adding to signs the economy was beginning to come back online after its historic crash in March and April.

Official data also showed that public borrowing rose to a record high, as the government debt exceeded 100% of economic output.

Sales volumes in May jumped by a record 12.0% after an unprecedented decline of 18.0% in April, a rise that was higher than expected but still leaves sales down 13.1% year-on-year. Most stores in England remained closed until June 15, suggesting a further leap is possible this month.

Britain closed non-essential retailers' shops in late March, and only a few like garden centers reopened in May.

Sales in non-food stores increased by 24% in May, but were still 42% lower than the same period last year, with clothing stores were the most affected category: sales fell more than 60%. Fuel sales also jumped by 49% as people in England returned to their cars.

Meanwhile, online sales increased to a third of total spending, a new record.

Public sector net borrowing reached 55.2 billion pounds ($ 68.7 billion) in May - nine times the level for May 2019 - a record high after the April reading was sharply adjusted.

Chancellor Rishi Sunak said: "The best way to restore our public finances on a more sustainable basis is to reopen our economy safely so that people can return to work."

The Institute of Financial Studies said Britain will continue to borrow heavily for the next five years. Borrowing is effective from the government by Bank of England, which raised its bond purchase program yesterday by 100 billion pounds.

Public sector debt rose to £1.95 trillion, exceeding 100% of economic output for the first time since 1963, when Britain was still paying off debts incurred World War II.

The measure reflects a record 20% contraction in the economy in April, as well as a boom borrowing without modern precedent. In April and May, borrowing reached £103.7 billion, £87 billion more than a year ago, but short of the government forecast of £122 billion.

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