Articles from May 2015

UK government borrowing unexpectedly falls to £6.8 billion in April

UK government borrowing fell unexpectedly to £6.8 billion in April, down from £9.3 billion a year earlier.

UK government borrowing unexpectedly falls to £6.8 billion in AprilIt is the lowest April government borrowing figure since April 2008, when public borrowing stood at £2.5 billion.

The Office for National Statistics (ONS) also revised its previous estimate of borrowing for the full financial year up slightly to £87.7 billion, from £87.3 billion.

But that was still comfortably below the government’s target of £90.3 billion.

As it is the start of the financial year little can be gleaned from the public borrowing figures as yet.

And as the ONS itself warned last week, borrowing figures in the first few months of the financial year are often subject to revisions.

In his March Budget, Chancellor George Osborne forecast public sector net borrowing would amount to £75.3 billion this financial year.

Last month, official figures showed the economy grew by 0.3% in the three months to the end of March, compared with 0.6% in the last three months of the year.

Mr Osborne plans to hold a new Budget on 8 July, when he is expected to outline his strategy to eliminate the deficit by the end of 2017 and achieve a Budget surplus in 2018-19.

It is expected he will outline £30 billion of spending cuts to government departments, including £12 billion of cuts to welfare spending.

It is also possible the chancellor may revise the government’s borrowing targets.

A Treasury spokesman said the borrowing figures showed the government’s deficit reduction plan was working, with borrowing in April £2.5 billion lower than the same month a year ago.

“We have more than halved the deficit, but at just under 5%, it is still one of the highest in the developed world,” the Treasury official said.

“There is no shortcut to fixing the public finances, so we have to continue with the hard work of identifying savings and making reforms necessary to finish the job and build a resilient economy.”

UK inflation rate turns negative

The main measure of UK inflation turned negative in April for the first time on record- with the rate falling to -0.1%.

UK inflation rate turns negativeIt is the first time that the Consumer Price Index (CPI) inflation has turned negative since 1960, based on comparable historic estimates, the Office for National Statistics said.

The biggest contribution to the fall came from a drop in air and sea fares.

Bank of England governor Mark Carney said he expected inflation to remain very low over the next few months.

But Mr Carney added that “over the course of the year, as we get towards the end, inflation should start to pick up towards our 2% target”.

The latest inflation figures show that transport costs were 2.8% lower in April than the same time a year ago, while food was 3.0% cheaper.

Chancellor George Osborne said the inflation figure should not be mistaken for “damaging deflation”.

He added that the lower cost of living – driven by last year’s fall in oil prices – would be a welcome relief for family budgets, in an environment in which average wages were finally beginning to rise.

“Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them, should they arise,” Mr Osborne added.

The latest inflation figure means that a basket of goods and services that cost £100 in April 2014 would have cost £99.90 in April this year.

The last time we saw a price fall in the UK was March 1960, before even I was born, when there was a drop (probably) of 0.6%.

Almost nothing changed between March and April’s inflation figures- the ONS says that the thing that did move, which was the price of air fares and sea fares, was depressed by the timing of Easter.

The prices that are used to calculate the CPI are collected in a few days in the middle of the month. In 2014, Easter fell during those days, which meant transport fares were inflated.

This year it didn’t, so fares were lower, which means today’s tiny deflation may be seen as a technical effect.

3i surges on strong earnings leading UK shares higher

UK shares gained value on London trading after falls overnight on Wall Street and in most of Asia.

3i surges on strong earnings leading UK shares higherThe benchmark FTSE 100 gained 0.34% to close at 6,973.04.

Private equity firm 3i Group was the biggest gainer which rose 3% after a strong set of full year results.

The company, which owns the Agent Provocateur lingerie business, says its net asset value had increased by 14% to 396p a share.

Mondi was another big winner in the FTSE 100, adding nearly 2.8%.

On Wednesday, shares in the packaging company jumped nearly 9% after the company reported a 29% rise in first-quarter operating profits.

Three of the five biggest losers on the 100 share index were companies going ex-dividend which means that anyone buying those shares will not receive the next dividend payments.

GlaxoSmithKline, Kingfisher and Aberdeen Asset Management all shed more than 1%.

On the currency markets, the Pound hit a five month high against the dollar, trading at $1.5748, but was little changed against the euro at €1.3868.