Britain's Budget Deficit Increases By More Than 150 Per Cent Up To £950 Million For July

Britain's budget deficit is up to £950m for July

Britain's budget deficit rocketed by more than 150 per cent to nearly £1billion in July, new figures from the Office for National Statistics this week are expected to show.

Public sector net borrowing, excluding the cost of the bank bailouts, was £950million in July according to the consensus forecast from City economists, compared with £375million for the same month the previous year.

July is traditionally a strong month for the Exchequer, with companies paying taxes and self-assessment revenues coming in.

However, official borrowing is believed to be higher because of the sluggish performance of the economy and the rising cost of inflation-linked interest repayments on Government bonds.

Simon Ward, chief economist at investment funds giant Janus Henderson, said: "July is normally a strong month for tax receipts and the self-assessment revenues should be quite healthy.

"However, the trend is for a mild deterioration, I expect borrowing to be higher in July than it was last year. It will be around £1billion."

Investec economist Victoria Clarke was more optimistic and said that the deficit could come in lower at £200million, though she warned: "The context for our forecast for the year is that we expect there to be deterioration with every month and for there to be greater borrowing."

Capital Economics economist Paul Hollingsworth agreed but warned that even if July's budget deficit comes in at £200million, borrowing for the year will be 8 per cent higher for the first four months than it was last year.

"Figures for the public finances should show a slight improvement on last year. However, this will probably be a temporary blip," he said.

Philip Hammond, July is traditionally a strong month for the Exchequer

Aside from publishing the latest figures on the public finances tomorrow, the ONS will unveil updated second-quarter gross domestic product data on Thursday.

It is expected to show that GDP growth has been flat at 0.3 per cent.

Despite the squeeze on household incomes, consumer spending on and off the high street has been resilient, which has helped offset weak performances from both the manufacturing and construction sectors.