Factbox: UK on course for highest borrowing since World War Two

By David Milliken
·3-min read
Britain's Chancellor of the Exchequer Sunak during an interview in London

By David Milliken

LONDON (Reuters) - Britain's government is on track to borrow roughly 400 billion pounds this financial year as it struggles with the social and economic impact of the coronavirus pandemic that has killed more than 55,000 people.

As a share of the economy, this will be the highest borrowing since World War Two, reflecting how Britain suffered a deeper slump in the first half of 2020 than other major economies.

But even with public debt above 2 trillion pounds, the cost of interest is low at under 2% of gross domestic product.

Following is a summary of Britain's fiscal position, ahead of updated economic forecasts to be announced by finance minister Rishi Sunak on Wednesday.


The budget deficit - the difference between government spending and the amount raised in taxes - totalled a record 215 billion pounds over the seven months since the start of the financial year in April.

During the whole of the last financial year, Britain borrowed 54.5 billion pounds, equivalent to 2.5% of GDP.

In July, the Office for Budget Responsibility said Britain would borrow 372 billion pounds, or 19% of GDP. Many economists think new forecasts on Wednesday will be slightly higher.

This would be the biggest borrowing since 1944 when it amounted to 23.5% of GDP. The deficit hit an all-time high of 27.1% in 1941.

During the last global financial crisis, the deficit peaked at 10.1% of GDP.


The International Monetary Fund, which calculates borrowing slightly differently, predicts that UK borrowing would total 16.5% of GDP in 2020, higher than any major European country though below the United States and Canada.

For 2021, it expects British borrowing to fall to 9.2%, the highest of any major economy.


Total public debt stands at 2.077 trillion pounds, 100.8% of GDP - a level which before this year was last seen in 1960.

This includes government bonds with a face value of 585 billion pounds bought by the Bank of England to stimulate the economy.

After the 2008-09 financial crisis, the debt-to-GDP ratio surpassed 80% of GDP from 34% before.

But today's debt levels are a fraction of the level after both World Wars and the debt burdens of many other countries.

Britain's debt-to-GDP ratio peaked at 249% of GDP in 1946, similar to Japan's now. The IMF says the average debt-to-GDP ratio for advanced economies will be 125.5% this year.


The proportion of national income Britain spends paying debt interest has fallen steadily since a peak of about 4% in the mid-1980s, helped by a long-term global fall in interest rates.

Britain was paying just under 2% of GDP in debt service costs before the coronavirus crisis, and - despite the rise in borrowing - this is set to fall further in the short term due to a drop in market interest rates.

Britain issues debt with a longer maturity than other countries, helping to insulate it from rises in rates.

But the Office for Budget Responsibility has warned that debt service costs could rise significantly if global interest rates returned to 20th century averages over the coming decades.

(Reporting by David Milliken; Editing by William Schomberg and Jonathan Oatis)