British government borrows record amount in April as retail sector sees worst slump
But strict lockdown measures lead to a surge in online sales
British government borrowing hit a record high in April, while retail sales saw their worst slump in history as the coronavirus pandemic took its toll on the economy.
The Office for National Statistics on Friday reported that borrowing surged to £62 billion last month, after heavy spending to dampen the impact of the lockdown measures that have been in place since mid-March.
The spending includes furlough schemes, where the government pays 80 per cent of the wages of people whose employer can’t afford to pay them. The scheme, which costs around £14bn a month, has been extended until October, covering 7.5 million jobs.
But the government has also rolled out £15bn of grants for small firms and £10bn of support for the self-employed, adding to the debt mountain.
The British deficit was larger in April than what was forecasted for the whole year in March, when the last Budget was announced. It projected that the surplus for the whole year would be £55bn.
Total public debt now stands at £1.9 trillion - about £28,000 per person in the UK.
The Office for Budget Responsibility (OBR), the government's independent forecaster, has predicted that borrowing for the whole year could reach £298bn - more than five times the estimate at the time of the Budget.
Meanwhile, the volume of domestic retail sales plunged by 18.1 per cent in April compared to that of the previous month, according to data from the ONS - the largest drop since records began in 1996. The previous record fall was 5.2 per cent in March.
Over 14 per cent of all British shops reported no turnover in April, including almost 40 per cent of department stores and 27 per cent of clothing and shoe stores.
“The effects of Covid-19 have contributed to a record monthly fall in retail sales of nearly a fifth. Fuel and clothing sales fell significantly while spending on food also dropped after the surge from the panic buying seen [in the previous] month,” said Jonathan Athow of the ONS.
However, there was a silver lining: online sales hit their record high last month, as lockdown encouraged more Britons to order groceries, household goods and other items on the internet. The ONS reported that online purchases accounted for 30.7 per cent of retail spending in Britain, up from 19.1 per cent a year earlier.
But analysts fear that the bleak retail figures show that the coronavirus pandemic could lead to the closing down on many high street shops.
Other economists have warned that the damage caused by the pandemic will linger on, long after lockdown measures have eased.
“The complete deterioration of retail sales reflects the widespread lockdown measures in place since the end of March,” CEBR economist Sam Miley, an economist at the Centre for Economics and Business research said.
“With certain restrictions now lifted, and potentially more to follow, retail sales should return to month-on-month growth. Nevertheless, the scale of the impact of lockdown, and the subsequent economic fallout, means we may not see a return to pre-crisis household consumption levels until the mid-2020s.”
The UK has confirmed more than 252,000 coronavirus cases and recorded over 36,000 deaths, according to data from Johns Hopkins University.
Updated: May 22, 2020 05:43 PM