UK public sector borrowing larger than expected

UK public sector borrowing larger than expected in March, but government hits full-year target

Associated Press

LONDON (AP) -- Britain's public sector borrowing in March was larger than expected at 18.2 billion pounds ($19.4 billion), but the government hit its full-year target as earlier months' data was revised, official data showed Tuesday.

The Office for National Statistics said that borrowing totaled 126 billion pounds for the financial year, the 12 months through March. That is 10.9 billion pounds less than the previous year.

March borrowing, however, was well above the consensus of 16 billion pounds.

Samuel Tombs, an economist at Capital Economics, says the March figures suggest that Britain's financial position is getting worse.

"With the economic recovery continuing to stutter, we think it will become increasingly difficult for the government to meet its ambitious deficit reduction plans in the coming fiscal year," Tombs said.

The government's target for this year is to trim borrowing to 120 billion pounds.

Wednesday's release of the GDP estimate for the first quarter is widely expected to show that the economy returned to growth following a 0.3 percent drop in the last three months of 2011.

The government expects GDP to rise by 0.8 percent this year, but Bank of England Governor Mervyn King says the economy is likely to follow an up and down course before returning to more sustained growth next year.

"Beyond this year, the resumption to trend growth next year and above-trend growth thereafter is looking like an increasingly optimistic assumption, given the current headwinds facing the U.K., notably the ongoing eurozone crisis, stubbornly high unemployment and inflation plus the impact of austerity measures," said Chris Williamson, chief economist at financial data company Markit.

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