Sobering Autumn Statement As Record UK Borrowing Announced

The pound lost some of its recent momentum this afternoon following a sobering Autumn statement from UK chancellor Rishi Sunak.

In a wide-reaching address to the House of Commons, chancellor Sunak announced the government would borrow £394bn this year in order to support the coronavirus crippled economy. Equating to 19% of 2020’s GDP, it signals the highest level of borrowing by any government in peacetime history.

UK GDP is set to contract 11.3% over the course of this year, its largest decrease in 300 years, whilst the countries overall economic output is not likely to return to pre-pandemic levels until the end of 2022.

Mr Sunak also confirmed a much-rumoured pause on pay increases for half of public sector workers, except for doctors and nurses, and that the National Living Wage is set to increase by 2.2%.

With unemployment predicted to hit 7.5% or 2.6 million in 2021, the government has created a £4bn Levelling-Up Fund to help stimulate local projects in towns and cities across the country. It’s raising some of these funds by cutting the foreign aid budget from 0.7% to 0.5% of GDP which could equate to as much as £5bn over 2021.

Sterling fell away from its two-week highs during and immediately following the speech, previously buoyed by post-Brexit trade deal optimism, positive news about a coronavirus vaccine and the end of the one-month full lockdown in England.