The UK government borrowed more than expected in April, underscoring the challenge for Rachel Reeves to fix public services and grow the economy while meeting her fiscal rules. With the chancellor under pressure on Labour’s tax plans, the Office for National Statistics (ONS) said public sector net borrowing rose to £20.2bn in April, £1bn more than the same month a year earlier. City economists had forecast borrowing of £17.9bn. More here: Stock markets are falling today, as investors fret about a worryingly weak auction of US government debt last night. In London, the FTSE 100 index fell 45 points at the open to 8741 points, away from the record high set in February. European markets are also in the red, with Germany’s DAX falling 0.4%, and France’s CAC down 0.5%. Stocks are weakening after investors shunned an auction of $16bn of 20-year US government bonds yesterday, forcing the Treasury Department to offer an interest rate, or yield, of over 5% to attract interest. That’s the highest rate on this type of bond since 2020, and may be a sign that demand for US assets is waning, less than a week after Moody’s downgraded the US credit rating from Aaa to Aa1. This prompted a selloff on Wall Street last night, as Jim Reid of Deutsche Bank explains: The soft 20yr auction was also a trigger for a broader market slump, with the S&P 500 falling from -0.2% on the day to -1.61% by the close, its worst day in the past month. This was a very broad-based decline with only 18 advancers in the whole index and the equal-weighted version of the S&P down -2.15%. Food ingredients firm Tate & Lyle has warned this morning that Donald Trump’s trade war will push up its costs and hurt sales. Tate & Lyle told shareholders that “tariffs and the associated uncertainty” have increased costs, mainly for products supplied between the US and China. With Washington and Beijing having agreed a 90-day truce earlier this month, Tate & Lyle are now awaiting “clarification on tariffs”. But in the meantime, it currently expects that revenue growth will only reach the bottom of its medium-term range, or slightly below it. Tate & Lyle also reported a 5% rise in revenues for the last financial year (to the end of March), although operating profits almost halved to £106m. The group sources raw foodstuffs from around the world, and creates ingredients designed to offer crunch or creaminess, add fibre, or a give a sweet taste to foodstuffs without the attendant calories. They originate from the likes of corn, tapioca, seaweed, stevia leaf and citrus peel. Chief Secretary to the Treasury, Darren Jones, has responded to April’s jump in borrowing, saying: “After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people. “We’re fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our Plan for Change.” Any night owls trying to browse the M&S website overnight would have been sorely disappointed. As of 6:20am this morning, visitors were still being greeted by a static landing page that simply read: “Sorry you can’t browse the site currently. We’re making some updates and will be back soon.” For now, the site seems up and running, though online orders are still paused. It’s not clear how long the outage ultimately lasted. When contacted this morning, M&S’ press office refused to say whether this was part of regular maintenance or linked to ongoing disruption from last month’s devastating cyber attack. M&S also refused to confirm whether customers should expect more website outages - cyber attack related or otherwise - in the coming weeks. M&S has been left with some empty shelves and been forced to halt online orders on its website after the hack on Easter weekend. The attack targeted customer personal data, which could have included names, email addresses, postal addresses and dates of birth. The company said on Wednesday that the attack had been caused by “human error”, and could end up costing the first around £300m. CEO chief executive Stuart Machin has said general disruption could last until July. The tax take from inheritance tax also rose last month. Figures from HMRC show that inheritance tax receipts rose by £97m year-on-year in April to around £800m. Shaun Moore, tax and financial planning expert at Quilter, predicts this upward trend will continue: With property prices remaining high and nil-rate bands still frozen until 2030, more families are being caught by IHT, many without realising until it’s too late. Upcoming changes to business and agricultural relief from 2026, and the inclusion of unused pensions in estates from 2027, mean this trend is unlikely to reverse any time soon. For those who are worried about IHT, gifting remains the best defence against it, but this should be weighed against your own needs. It’s not all bad news for Rachel Reeves, though. The Office for National Statistics has revised down its estimate for borrowing in the last financial year, to £148.3bn. That’s £3.7bn less than the initial estimate, but still £11bn more than had been forecast by the Office for Budget Responsibility (OBR). Today’s borrowing figures are “disappointing”, and highlight the Chancellor’s lack of wiggle room, says Ruth Gregory, deputy chief UK economist at Capital Economics. Gregory told clients: April’s public finances figures showed that despite the boost from the rise in employers’ National Insurance Contributions (NICs), the fiscal year got off to a poor start. This raises the chances that if the Chancellor wishes to stick to her fiscal rules, more tax hikes in the Autumn Budget will be required. Here’s a chart showing the details of today’s public finances: Good morning, and welcome to our rolling coverage of business, the financial markets and the eurozone. It’s a new financial year, but the same old story for the UK government, as borrowing rises faster than expected. The latest public finance figures, just released, show that the UK borrowed £20.2bn in April. That’s £1bn more than in April 2024 and the fourth-highest April borrowing since monthly records began in 1993. City economists had forecast a deficit of around £18bn, so the new financial year has not gott off to a great start for Rachel Reeves, at a time when the chancellor is under pressure to raise taxes to avoid cuts to welfare payments. The public finances report shows that central government’s current receipts rose by £5.1bn year-on-year, due to increased tax receipts – including £1.7 billion in Income Tax, £500m in Value Added Tax (VAT), £500m in tobacco duty, £400m in stamp duty (on land and property), and £200m in Corporation Tax receipts. However, spending rose too – central government’s current expenditure increased by £4.2bn, as pay rises and inflation pushed up the cost of goods and services, and some benefits increased in line with inflation. ONS deputy director for public sector finances Rob Doody says: “At £1 billion higher than the same time last year, this April’s borrowing was the fourth highest for the start of the financial year since monthly records began more than 30 years ago. “Receipts were up on last April, thanks partly to the higher rate of National Insurance contributions. However, this was outweighed by greater spending, due to rising public services’ running costs and increases in many benefits and state pensions.” Happily, though, the interest payable on central government debt fell by £500m to £9.0bn, due to lower payments on inflation-linked bonds. The agenda 7am BST: UK public finances for April 9am BST: Eurozone ‘flash’ PMI report for May 9am BST: IFO survey of eurozone business confidence 9.30am BST: UK ‘flash’ PMI report for May 11am BST: CBI industrial trends 1.30pm BST: US weekly jobless claims 1.30pm
Author: Graeme Wearden