Investment News Pound Falls As UK Debt Rises

21 July 2010 / by Lois Avery

Sterling fell against the Euro today after the Office for National Statistics released figures showing that the UK’s debt isn’t reducing as fast as hoped.

Despite economists predicting a fall to £15 billion the ONS announced that public sector net debt rose in June to a record 63.9 per cent as a percentage of GDP. And borrowing for Government spending reached £20.905bn in June, up from £20.213bn in the same month last year.

The news spurred a fall in Sterling this morning as it slid to a session low against the euro, tumbling 0.16 per cent.

Tiffany Burk, European Market Analyst at Travelex Global Business Payments said: “This is the biggest public sector net cash requirement for June since records began in 1984 and it is helping to send the pound lower in trading this morning.

“Whilst the data is slightly backward looking, as Labour’s policy measures are still in place, it does highlight how dependent the Government has been on borrowing to date and is a very discouraging figure. No doubt the data will toughen the Coalition’s resolve to persevere with the swingeing spending cuts and tax hikes they have planned.”

But she stressed that the outlook remains positive: “The downside to sterling is limited because risk appetite remains positive in broader markets. Equity markets are trading higher and investors remain optimistic over the release of the upcoming stress tests for the 91 European banks. This confidence is helping to support risk appetite.”

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Written by Editorial Team