MNI DATA IMPACT: UK April Sales Collapse, Gov Borrowing Surges

By Laurie Laird

     LONDON (MNI) - UK debt rose to its highest level as a percentage of GDP

since fiscal year 962/63 in April, as coronavirus-related spending hit the

government accounts, while retail sales suffered a record fall.

     The following are the main points from the public sector finance and retail

sales reports for April released on Friday by the Office for National

Statistics.

     - Government borrowing rose to a record GBP62.1 billion in April as Covid

spending hit the books, taking the debt as a ratio to GDP (including Bank of

England) to 99.7%, the highest since the 1962/63 fiscal year. Statisticians

cautioned that the increased ratio reflects rising borrowing as well as

projected sharp falls to GDP.

     - Retail sales plunged by a record 18.1% in April, underperforming

already-grim forecasts of economists. Almost every category of sales recorded

sharp declines: Clothing and footwear fell by 50.2%; household good sales

plunged by 45.4%. Food sales declined by a record 4.1%, as highlighted in the

MNI Reality Check.

     - Borrowing for the 2020/21 fiscal year was also revised sharply higher, to

GBP62.7 billion from the GBP48.7 billion reported last month. The revision

reflects additional spending for Covid-19 support schemes and reduced VAT and

corporate tax receipts. That left borrowing (including Bank of England

purchases) at 93.3%, also the highest since the 1962/63 fiscal year.

     - VAT cash receipts were negative in April, for the first times since

records began in 1987. That means the Treasury VAT rebates exceeded receipts by

GBP900 million last month.

     - Public finance data will "certainly" undergo further revisions in months

to come, according to a statistician, adding that even in ordinary times,

full-year spending data don't "settle down until round about September."

     - April retail sales may be less subject to revision, with the response

rate to the ONS survey hitting 82%, only slightly below the typical return of

85%. The drop in Q1 sales was revised slightly upward to -1.5% from the

originally-reported -1.6%, but that is unlikely to effect the 0.09 percentage

point drop in Q1 GDP, according to a statistician.

     - Internet sales provided a ray of brightness in a bleak retail sales

report, with online transactions surging by record-high 15.8% between March and

April, taking internet commerce to an all-time high of 30.0% by value last

month.

     - Retail sales had been weakening even before the coronavirus shock. Sales

declined by a record-high 8.6% in the three months to April, the seventh

straight month of no growth, the longest stretch of weakness since the nine

months ending in January of 2009.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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