Business news live: UK retail sales rise, government borrowing surges to £18bn

Retail numbers have come through this morning too – and they are up for August.

Monthly sales rose 0.5%, same as they did in July, though that does still mean that across the three-month period there was a drop overall of 0.1 per cent.

“Retail sales fell slightly across the latest three months though at a slower rate of decline than seen last month,” said the ONS.

“This was mainly due to a poor period for non-food stores, such as antiques dealers and auction houses as well as tech stores, with fuel sales also falling. These were only partially offset by increases from online and clothing shops.

“Looking at the monthly picture, retail sales increased in August with feedback suggesting the good weather helped boost sales of clothing.”

Tax rises in the Budget are “all but certain” as a result of the extra government spending, says Lindsay James, investment strategist at Quilter.

The deficit is now estimated at £62bn and with the economy simply not growing, it’s a big problem for Rachel Reeves to fix in her November statement.

“Once again the UK government’s borrowing for August highlights why it seems all but certain that tax rises are coming at the Budget in two months’ time,” said Ms James.

“The ONS has put August’s borrowing figure at £18bn, putting the budget deficit for the financial year to date at £62bn, £13.8bn higher than the same time last year. This was the highest level of borrowing in August for five years, when we were still dealing with the fallout of the first pandemic lockdown. These figures are staggering and are not showing an economy that is in rude health.

“It is clear that further borrowing is not an option and with the UK currently suffering from a yield premium compared to the rest of the G7, the markets are demanding additional reward for providing funds to the government. Indeed, the government has a litany of fiscal pressures outside of the now familiar low growth environment we find ourselves in. Productivity is likely to be downgraded when we get to the Budget, while higher and persistent inflation is pushing up index linked costs.

“The UK economy without a doubt is bending, but likely will not break yet. However, the remedy will need to be harsh, something politicians on all sides appear reluctant to accept. Labour is likely to go down the route of raising more taxes, particularly on wealthier individuals. But the economic growth effects this has will not be positive. Meanwhile, this government has shown it is incapable of driving through necessary spending cuts, when in reality there needs to be a mix of the two.”

Spending has been on the agenda again for the government it seems – and the bill has come in far higher than projected.

August’s total of £18bn is second for that month only to 2020 – the pandemic – and the OBR had only expected around £12.5bn in their projections earlier this year.

“Last month’s borrowing was the highest August total since the pandemic. Although overall tax and National Insurance receipts were noticeably up on last year, these increases were outstripped by higher spending on public services, benefits and debt interest. Total borrowing for the financial year to date was also the highest since 2020.”

Good morning all – time to dive back in for one final weekday of business news, stock market updates and everything that matters for your money.

Today we’re looking at retail sales and government borrowing too – both higher than expected in August.