UK debt is bigger than economy for first time since 1963 | Business

Britain’s public debt is larger than the size of the country’s economy for the first time since 1963, after the government borrowed a record £55bn in May.

The total level of debt has risen by £173bn over the last year to reach £1.95tn, or 100.9% of GDP, as ministers introduced unprecedented support for businesses and households during the coronavirus crisis.

The UK joined Italy, the US and Japan in the club of nations with levels of borrowing higher than their national income as the latest Office for National Statistics figures showed the UK government borrowed £55.2bn in May, roughly nine times more than the same month last year and the highest monthly borrowing since comparable records began in 1993.

The chancellor, Rishi Sunak, said: “Today’s figures confirm that coronavirus is having a severe impact on our public finances. The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work.

“We’ve set out our plan to do this in a gradual and safe fashion, including reopening high streets across the country this week, as we kickstart our economic recovery.”

Separate data from the ONS showed UK retail sales increased by 12% in May as consumers began to buy homewares for the first time since the lockdown began in March.

The ONS said non-food stores provided the largest positive contribution to the monthly increase, aided by the opening of DIY shops, which had a 42% rise in sales.

However, the tentative signs of life on the high street still left overall sales down 13% on their level in February.

Retail sales recorded their largest fall on record in April, tumbling 18.1%, the ONS said.

In a clear message that shoppers have also changed their habits during the lockdown, the biggest gains went to online shops, which accounted for 33.4% of all spending, which compares with the 30.8% reported in April and an average of 18% seen last year.

Neil Birrell, the chief investment officer at the asset manager Premier Miton, said the sales figures showed the UK following the rest of Europe out of the lockdown period.

“Retail sales for May surprised on the upside, showing a much bigger recovery than expected, month on month.

“This data does not include the effect of reopening the high street this week and it gives the optimists renewed hope that the recovery in the UK will come through as it has in other countries as lockdown eases.”

However, Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said the picture remained grim for most retailers as many households hoarded cash.

“Unofficial indicators of households’ overall spending remain very weak; Barclaycard, for instance, reported that spending fell 26.7% year over year in May, not vastly better than April’s 36.5% decline,” he said.

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In April the government was forced to borrow a record £62bn to balance its books, with public borrowing up by more than £50bn on the same month a year earlier.

In May the government announced it would need to borrow an extra £225bn to get through the summer months while the economy remained weak.

In March, Sunak, announced a number of measures to protect businesses from the worst of the Covid-19 fallout, including a business rates holiday. In April the government banned commercial landlords from “aggressive rent collection” to help retailers that had fallen behind with payments during the lockdown.

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