Photo credit: www.theguardian.com
Introduction: UK Annual Borrowing Surpasses Official Forecast; Market Reactions to Trump’s Comments
Good morning, and welcome to our ongoing coverage of the business landscape, financial markets, and global economic developments.
Recent data reveals that government borrowing in the UK exceeded expectations significantly, leading to a total of £15 billion above official forecasts for the year. This situation accentuates the challenges facing Chancellor Rachel Reeves.
In March, borrowing recorded a figure of £16.4 billion, £2.8 billion more than the same month last year, marking it as the third-highest borrowing total for March since the beginning of records in 1993.
For the fiscal year concluding in March, total government borrowing reached £151.9 billion, which is £20.7 billion more than the previous year and exceeds the Office for Budget Responsibility’s (OBR) forecast by £14.6 billion.
Excluding public sector banks, public sector net borrowing stood at £151.9 billion for the 2024 to 2025 financial year, equating to 5.3% of GDP and representing the third-highest total recorded, up by £20.7 billion from the last fiscal year.
For further details, visit https://t.co/OKGJdDm02v pic.twitter.com/obTVjjOX9x
— Office for National Statistics (ONS) (@ONS) April 23, 2025
Nabil Taleb, economist from PwC UK, commented:
March’s debt interest payments hit £4.3 billion, the highest recorded figure for that month in the past 27 years, highlighting the significant fiscal challenges at hand. The rising debt servicing costs relative to total revenue expose the public finances to greater risks amid potential economic downturns.
Chancellor Reeves must navigate a critical six-month period and demonstrate fiscal responsibility. Although her spring statement reinstated a £9.9 billion cushion, this safety net remains fragile. In the worst-case scenario presented by independent forecasts, new tariffs from the Trump administration could potentially reduce UK GDP by 1%, potentially eliminating the fiscal headroom entirely. Coupled with climbing government borrowing costs and a backdrop of global uncertainty, pressure is mounting for Reeves to consider tax increases in the forthcoming autumn budget.
In market reactions, stocks and the dollar showed signs of recovery, alongside rising oil prices. This trend followed Donald Trump‘s tempered remarks regarding Federal Reserve Chairman Jerome Powell, whom he had previously criticized. Trump indicated he would not dismiss Powell and suggested potential reductions in tariffs for China, information that buoyed investor sentiment. Scott Bessent noted that the current tariff landscape is “unsustainable” and anticipates a shift toward de-escalation soon.
The Dow Jones Industrial Average, S&P 500, and Nasdaq all rebounded, posting gains over 2.5% following the previous day’s decline.
In Asian markets, Japan’s Nikkei index climbed nearly 2%, while Hong Kong’s Hang Seng and South Korea’s Kospi recorded gains of 2.2% and 1.6%, respectively.
The dollar, having previously dipped to a three-year low, staged a recovery and increased by 0.25% against a range of major currencies.
According to ING currency analyst Francesco Pesole, the recovery in US market sentiment provides a boost for the dollar. He emphasized that no other G10 currency reacts more positively to US trade news than the dollar, and Bessent’s optimistic comments regarding trade negotiations could aid in stabilizing the dollar’s value.
In the oil sector, Brent crude rose by 1.3% to $68.32 per barrel, with US crude increasing by 1.37% to $64.55 per barrel. Signs of resolving trade tensions could enhance global economic growth, which would subsequently increase crude demand.
The Agenda
9am BST: Eurozone HCOB PMI surveys flash for April
9.30am BST: S&P Global PMIs flash for April
10am BST: Eurozone trade figures for February
2.45pm BST: US S&P Global PMIs flash for April
5.30pm BST: Speech by Bank of England Governor Andrew Bailey
Source
www.theguardian.com