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U.K. June Budget Deficit Higher Than Economists Forecast

Britain’s budget shortfall was larger than economists forecast in June, prompting economists to question whether Chancellor of the Exchequer George Osborne can meet his deficit-reduction targets for the year.

The 14 billion-pound ($22.6 billion) deficit, which excludes government support for banks, was little changed from the 13.6 billion pounds posted a year earlier, the Office for National Statistics said in London today. The median of 13 forecasts in a Bloomberg News survey was for a deficit of 12.5 billion pounds. Revenue rose 5.6 percent and spending grew 4.9 percent.

The government is pushing through austerity measures to reduce the budget shortfall, which reached a record 11 percent of gross domestic product in the aftermath of the recession. With the economic recovery showing signs of cooling, the Labour opposition and some economists say Osborne may find it hard to achieve his target of limiting the deficit to 122 billion pounds in the fiscal year through March.

“Expenditure will need to be reined back in the coming months,” to meet that goal, said Hetal Mehta, an economist at Daiwa Capital Markets Europe in London. “But with economic growth remaining feeble, tax receipts could falter, and we think it is more likely that the government ends up overshooting its target.”

In the first three months of the fiscal year, the budget gap was 33.9 billion pounds, compared with 33.7 billion pounds in the same period a year earlier. The shortfall including government support for banks was 12 billion pounds in June. The cash measure of the deficit was 21 billion pounds.

“Today’s figures show that the government’s fiscal plans remain on track and in line with the overall forecast for the year from the independent Office for Budget Responsibility,” the Treasury said in an e-mailed statement.

The pound stayed higher against the dollar after a separate report showed retail sales rose in June as shops offered discounts to lure consumers squeezed by strengthening inflation and slow wage growth. It was at $1.6140 as of 10:21 a.m. in London, little changed on the day.

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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