الأربعاء، 21 نوفمبر 2012

Figures Show Fragility of British Recovery

LONDON — Weak growth and a resulting fall in tax receipts prompted Britain to borrow much more than expected last month, official figures showed Wednesday, underlining the fragility of its recovery and the risk that its deficit reduction target could be missed.

The Office for National Statistics said government borrowing in October was £8.6 billion, or $ 13.7 billion, compared with £5.9 billion the previous year. Corporation tax receipts were down 9.5 percent while spending on social benefits increased 7.7 percent from October 2011.

Although Britain emerged from recession with a 1 percent increase in growth in the third quarter, analysts have cautioned that this was distorted by special factors like the Olympic Games and that the outlook for economic growth remains feeble.

The figures Wednesday support that thesis, suggesting that the chancellor of the Exchequer, George Osborne, will struggle to hit his target of limiting borrowing for 2012-13 to £120 billion. In the longer term some analysts also believe that Britain’s gold standard credit rating is at risk.

Sam Hill, fixed income strategist for Britain at RBC Capital Markets, said in a note that the borrowing figure for October had exceeded the consensus expectation of £6 billion.

“With data for seven months of the fiscal year now in, the government have borrowed 61 percent of the full year target of £120 billion, about four percentage points higher than trend over the last three years,” he said. “We believe this is consistent with our forecast for an upward revision to the £120 billion borrowing target of £5 billion.”

The lack of clear signs of a return to robust economic growth remains the main concern for most analysts.

“The underlying story of this year is tax receipts coming in weaker than expected,” said Robert Wood, chief economist for Britain at Berenberg Bank in London. “That’s because growth has stalled.”

Mr. Wood said it was still “touch and go” as to whether the government would meet its deficit reduction targets.

“I still think that the credit rating is more likely than not to be downgraded over the next few years,” he added.

The government argued that the figures indicated that it was keeping control of spending.

“The economy is healing, but it still faces many challenges,” said a spokesman for the Treasury who asked not to be named in line with policy. “These numbers illustrate that, but also show the government’s plans to bring spending under control are on track for the year.”

The same spokesman said corporation tax receipts were hit by lower energy production from the North Sea than expected.

In a separate development, minutes of the last meeting of the monetary policy committee of the Bank of England revealed divisions at the central bank over how to manage a return to growth, with one member calling for more economic stimulus.

David Miles argued that an asset buying plan, intended to improve growth, could be increased by £25 billion without stoking inflation. The committee, however, which has already pumped £375 billion into the economy via such quantitative easing, elected not to expand the program.

The panel also discussed reducing the benchmark interest rate from its record low of half a percent, but unanimously voted for no change.

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Figures Show Fragility of British Recovery

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