(Alliance News) - UK government debt was bigger than the entire size of the economy in October, the Office for National Statistics said Friday, providing a stark reminder of the costs of combating the Covid-19 health crisis.
The ONS said the ratio of debt to gross domestic product has reached 100.8%, a level not seen since the early 1960s.
Public sector net borrowing - excluding public sector banks - was estimated to have been GBP22.3 billion in October, GBP10.8 billion more than a year ago, the ONS said. This is both the highest October borrowing and the sixth-highest borrowing in any month since monthly records began in 1993, the statistical body noted.
Samuel Tombs, chief UK economist at Pantheon Marcroeconomics, said net borrowing was well below market consensus of GBP30.0 billion. However, the trend will deteriorate in the winter, he predicted, and the Office for Budget Responsibility won't revise down its borrowing forecast next week.
Total public sector net debt, excluding public sector banks, rose by GBP276.3 billion in the first seven months of the financial year to reach GBP2.076 trillion at the end of October, or around 100.8% of UK GDP.
"Debt to GDP ratios in recent months have reached levels last seen in the early 1960s," the ONS commented. The coronavirus pandemic has had a "substantial impact" on public sector borrowing, it added.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 6,339.16
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Hang Seng: up 0.3% at 26,425.57
Nikkei 225: closed down 0.4% at 25,527.37
DJIA: closed up 44.81 points, 0.2%, at 29,483.23
S&P 500: closed up 0.4% at 3,581.87
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GBP: up at USD1.3272 (USD1.3225)
EUR: up at USD1.1868 (USD1.1840)
Gold: flat at USD1,862.17 per ounce (USD1,861.42)
Oil (Brent): flat at USD44.24 a barrel (USD44.22)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
1100 GMT Ireland wholesale prices
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UK retail sales growth slowed month-on-month in October, but still managed to beat forecasts as consumers started Christmas shopping early, data showed. Sales rose 1.2% month-on-month in October, marking the sixth consecutive month of growth in the industry. While this was slower than the 1.4% posted for September, it beat expectations, according to FXStreet, of stagnation in the month. Annually sales growth accelerated to 5.8% from 4.6% in September, again beating forecasts for a slower 4.2% increase. Feedback suggested that consumers had started Christmas shopping earlier this year, the ONS said, further helped by early price discounting by a range of stores.
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UK households are becoming less confident about their personal finances in the year ahead, according to an index. The report from research company GfK asks people how they feel about their personal finances and the wider economy. Overall, consumer confidence declined two points in November compared with October, to a negative reading of minus 33 in November. People's feelings about their own personal financial situation in the next 12 months deteriorated five points to a score of minus five, from zero in October. Consumer confidence in making major purchases also became more negative, with a score of minus 28 in November, from minus 27 in October.
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UK Chancellor Rishi Sunak is preparing to impose a pay cap on five million public sector workers as he seeks to rebuild the public finances, according to reports. The chancellor will use next week's spending review will limit pay rises in the public sector to at or below inflation, the Daily Mail reported. Only frontline NHS doctors and nurses will be exempt from the cap in recognition of their work during the coronavirus pandemic, the newspaper said. However teachers, police, members of the armed forces as well as NHS managers will all be affected.
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Northern Ireland will shut non-essential retail, pubs and restaurants for two weeks from November 27 to save the health service from becoming swamped. The country was poised to emerge from a limited circuit-breaker lockdown until the number of infections rose to worrying levels. Close-contact services and cafes can open this Friday as planned but will have to close again next Friday, while other hospitality sectors like pubs and licensed restaurants will remain closed throughout, Stormont ministers said.
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The People's Bank of China left interest rates unchanged again as expected, the central bank said on Friday. The Chinese central bank has now kept its benchmark interest rate at the same level for the seventh month in a row. The one-year loan prime rate was held at 3.85%, the last time the rate was changed was back in April. The five-year rate also was unchanged at 4.65%.
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BROKER RATING CHANGES
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CITIGROUP RAISES CRODA INTERNATIONAL TO 'BUY' ('NEUTRAL') - PRICE TARGET 7,400 (6,000) PENCE
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BARCLAYS INITIATES QUILTER WITH 'EQUAL WEIGHT' - TARGET 140 PENCE
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BARCLAYS INITIATES INTEGRAFIN WITH 'OVERWEIGHT' - TARGET 600 PENCE
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COMPANIES - FTSE 100
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Accounting software firm Sage Group said its recently ended financial year was "strong" with recurring revenue growth in line with forecasts. Revenue for the financial year ended September 30 was GBP1.90 billion, down 1.7% on GBP1.94 billion the year before. Revenue was up 3.7% on an organic basis and organic recurring revenue rose 8.5%. Pretax profit increased 3.3% to GBP373 million from GBP361 million. Looking to the new financial year, Sage said it expects organic recurring revenue growth to be around 3% to 5%, weighted towards the second half. The company said Sage Business Cloud adoption and growth will remain its "key objective" this coming financial year and beyond, and it intends to increase its investment in sales and marketing and product development. This is expects to result in a planned reduction in organic operating margin of up to three percentage points. Beyond the 2021 financial year, though, Sage expects margins to trend upwards "over time". Sage lifted its dividend for the year by 2.0% to 17.25p.
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Paper and packaging firm Smurfit Kappa said it has raised EUR660 million in a share placing. Smurfit placed 1.4 million shares at a price of EUR34.00 each, the price being a discount of 5.8% to its Dublin closing price on Thursday. The Irish company said it was pleased by the "strong support" received from existing and new shareholders.
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AstraZeneca said Imfinzi has been approved in the US for an additional dosing option, a 1,500 milligram fixed dose every four weeks. Imfinzi is used in the approved indications of unresectable stage III non-small cell lung cancer after chemoradiation therapy and previously treated advanced bladder cancer. The Cambridge, England-headquartered pharmaceutical company said this new option is consistent with the approved Imfinzi dosing in extensive-stage small cell lung cancer and will be available to patients weighing more than 30 kilograms.
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COMPANIES - FTSE 250
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Hochschild Mining declared a dividend and gave production guidance for 2021. The gold miner said it has approved the payment of an interim dividend of 4.0 cents per share. "This decision was taken following the withdrawal of the recommendation to pay the 2019 final dividend and the postponement of the 2020 interim dividend due to the uncertainties caused by Covid-19 and the risk to the company's operations," Hochschild said. While the Covid-19 crisis continues to affect both Peru and Argentina, Hochschild said its balance sheet remains strong with its mines delivering a period of "steady operation", supported by robust commodity prices. The board will consider the payment of a final dividend in respect of 2020 and at its next scheduled meeting in February. Turning to guidance, Hochschild said it is on track to meet revised production guidance for 2020 of 280,000 to 290,000 gold equivalent ounces and 24.0 million to 25.0 million silver equivalent ounces. The all-in sustaining cost from operations in 2020 is now expected to be lower than revised guidance, at between USD1,200 and USD1,250 per gold equivalent ounce. For 2021, Hochschild said its overall attributable production target is 360,000 to 372,000 gold equivalent ounces and 31.0 million to 32.0 million silver equivalent ounces.
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Thousands of British Gas workers are to be balloted on strikes in a dispute over new contracts. The GMB warned that industrial action could be held over Christmas if there is a yes vote, although it has pledged to exempt the elderly and vulnerable in homes without heating. The union has accused the company, part of Centrica, of threatening to fire and rehire 20,000 workers if they do not accept changes to their pay and conditions. An indicative ballot in August showed that most members would be in favour of industrial action if there was a vote.
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COMPANIES - MAIN MARKET AND AIM
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U-blox Holding said it has submitted a 250 pence per share takeover offer for Telit Communications. Shares in Telit closed 4.5% higher at 168.20p each on Thursday in London, giving it a market capitalisation of GBP223.8 million. The Swiss-listed semiconductor manufacturer said while it has not yet received a reply from the London-based internet-of-things company, it believes a combination of the two companies has a "strong strategic rationale and could result in substantial synergies for both organisations". Back in 2018, the Sunday Times reported that U-blox was considering a GBP150.0 million offer for Telit's automotive business. Separately, earlier in November this year, Telit confirmed Dbay Advisors Ltd and Lantronix Inc made preliminary approaches for the firm.
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COMPANIES - GLOBAL
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China's aviation regulator will not yet allow Boeing's troubled 737 MAX jet to fly in the company's biggest market owing to lingering safety concerns, despite the US lifting a ban on commercial flights on Thursday. Boeing's best-selling aircraft was grounded worldwide early last year following two crashes that killed 346 passengers. It has since faced lengthy tests and approval processes with aviation regulators worldwide. But the Civil Aviation Administration of China said that there was "no set timetable" for the resumption of flights, according to state broadcaster CCTV, dealing a blow to the plane-making giant. China was the first to suspend flights of the aircraft. The regulator added that the results of investigations into the deadly crashes in Indonesia and Ethiopia "must be made clear" and that the aircraft design improvements must be "effective" and "receive approval".
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Friday's Shareholder Meetings
Go-Ahead Group PLC - AGM
Salt Lake Potash Ltd - AGM
Diurnal Group PLC - AGM
MC Mining Ltd - AGM
GSTechnologies Ltd - AGM
Gulf Investment Fund PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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