The Treasury has responded to the latest public finances figures, seizing on the fact that borrowing in the fiscal year so far is the lowest since 2007.
A spokesperson said:
This is the best year-to-date borrowing in a decade, but there is still further to go to repair the public finances.
We continue to build an economy fit for the future by taking a balanced approach, getting debt falling while investing in our vital public services and keeping taxes low.
Plunging car figures show UK is in the ‘slow lane’, union says
The jewel in Britain’s manufacturing crown is at risk because of Brexit uncertainty and falling wages according to Britain’s largest union, Unite.
The latest figures from the Society of Motor Manufacturers and Traders show the number of cars made in British factories destined for the UK market plunged 28% in November to 24,276. It was the fourth month in a row that cars built for the home market fell.
Tony Burke, Unite assistant general secretary, said it was terrible news for Britain:
This is awful news in the run-up to Christmas for the British car industry and the UK economy. The continued falling demand in the UK market because of Brexit uncertainty and falling wages is yet more evidence of the government’s economic incompetence.
When other economies around the world are motoring ahead, the UK is stuck in the slow lane hobbled by the biggest squeeze in wages since the Napoleonic era. Meanwhile uncertainty around Brexit is leaving motor manufacturers stalling on the investment needed to maintain Britain’s world leading status in car making.
The motor industry is the jewel in the UK’s manufacturing crown, sustaining communities with decent well paid jobs. Government ministers need to rid themselves of their economic complacency and tackle falling incomes which are putting people’s wallets and the UK economy into reverse.
Government borrowing falls in November
The UK government borrowed £8.7bn last month, which was £200m less than the same month last year and the lowest November net borrowing since 2007, on the eve of the financial crisis.
It was lower than the £8.9bn predicted by economists. The figure for October was also revised down, to £7.8bn from £8bn, topping off some decent news for the chancellor, Philip Hammond.
Borrowing in the fiscal year so far (April to November) was £48.1bn, down £3.1bn on the same period last year, and also the lowest since 2007.
It puts the chancellor on course to meet the Office for Budget Responsibility’s expectation that full-year borrowing to the end of March 2018 will be £49.9bn.
January usually brings a big surplus when annual income tax bills are due.
The figures were boosted by the Office for National Statistics’ decision to reclassify housing associations as private rather than public sector for the first time this month. This is estimated to have pushed down borrowing by about £300m.
Ruth Gregory, UK economist at Capital Economics, says she isn’t getting “too carried away” by the figures:
While a continuation of the current trend would see borrowing undershoot the OBR’s forecast by £7bn, some deterioration in the public finances should occur towards the end of the fiscal year. In particular, strong self-assessment tax receipts collected in January and February 2017 – due to changes in the dividend tax rate – won’t be repeated.
As a result, we doubt that borrowing will come in significantly below the OBR’s current £49.9 forecast for the 2017/18 fiscal year. However, if we are right in thinking that the OBR is too gloomy about the prospects for GDP growth, then borrowing should come down at a faster rate than it expects further ahead.
Alex Buttle, director at the car comparison website, motorway.co.uk, is downbeat about prospects for Britain’s car industry:
This is a stunning fall in domestic demand and pretty much sums up the last six months for an industry reeling from punitive diesel taxes and crumbling consumer confidence.
The fact that manufacturing levels fell just 4.6% last month, when domestic demand dropped off a cliff, shows just how reliant we are on exports. And that’s probably more worrying than faltering demand, as right now we have no EU trade agreement and zero clarity over trading agreements with countries outside the EU.
The UK car industry is teetering on the edge, and the economic landscape is unlikely to improve in 2018 with Brexit uncertainty ramped up to another level.
UK car manufacturing on course for first annual fall in 8 years
The number of cars made in UK factories in the first 11 months of the year was 2% lower than over the same period in 2016, at 1.58m vehicles.
If the weak trend persists in December, UK car production will have suffered its first annual fall since 2009, when Britain was in the depths of the financial crisis. In that year, production plunged 31% to 999,460 cars.
UK house builders fall after ground rent clampdown
Britain’s listed house builders are among the FTSE 100’s biggest fallers this morning:
It follows the government’s decision to go further than expected by forcing developers to ban controversial ground rents for all new apartments and houses.
Sajid Javid, the communities secretary, also said the government would go ahead with a ban on leaseholds on new-build houses, first announced in July.
European markets lack festive cheer
European investors are in no mood to celebrate this morning, with the major markets following Wall Street lower.
It turns out the markets are not as ecstatic about the successful passage of Donald Trump’s as the President himself.
Here are the latest scores:
- Germany’s DAX: -0.4% at 13,019
- France’s CAC: -0.5% at 5,324
- Italy’s FTSE MIB: -0.3% at 22,050
- Spain’s IBEX: -0.6% at 10,148
- Europe’s STOXX 600: -0.4% at 387
UK consumers gloomy in December
UK consumer confidence fell again in December according to the latest monthly snapshot from GfK.
The index fell by one point to -13, marking almost two years of declining consumer confidence.
GfK’s Joe Staton said there was nothing to suggest the mood among UK households would pick up any time soon:
We need to see several issues move on before the downward trend of the consumer mood changes. We need to have a better sense of how Brexit will pan out, and also of how quickly and how far interest rates will rise. But none of this will be resolved quickly so there’s every likelihood that 2018 will take us lower.
Garry White, chief investment commentator at Charles Stanley, has found something to be cheerful about in the UK car market:
UK car manufacturing is on course to fall in 2017 overall.
In the first 11 months of the year, a total of 1.58m cars rolled off UK production lines, down 2% compared with the same point in 2016.
Vehicles destined for the UK market were down 9% over the period, to 322,551, while those destined for export markets were roughly flat at 1.25m.
The agenda: UK car production slumps
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
November was another poor month for Britain’s car industry, which has been hit by falling demand in 2017 as consumers faced with Brexit uncertainty and falling real pay become less willing to splash out on big purchases.
The number of cars made in British factories last month and destined for the UK market plunged 28% to 24,276 according to the Society of Motor Manufacturers and Traders (SMMT). It was the fourth month in a row of falling domestic demand, and the biggest drop of 2017.
There was however a 1.3% rise in cars made in the UK and destined for export markets, as other economies fare better than Britain. Cars built to be shipped abroad totalled 137,214 and accounted for 85% of the total.
Overall, car production fell 4.6% in November, as 161,490 cars left UK factories.
The figures underline just how reliant on foreign trade the UK car industry is.
Mike Hawes, chief executive of the SMMT, said:
Brexit uncertainty, coupled with confusion over diesel taxation and air quality plans, continues to impact domestic demand for new cars and, with it, production output. Whilst it is good to see exports grow in November, this only reinforces how overseas demand remains the driving force for UK car manufacturing.
Clarity on the nature of our future overseas trading relationships, including details on transition arrangements with the EU, is vital for future growth and success.
Also coming up today:
- 9.30 GMT: UK public finances data will show how much money the government had to borrow in November
- 1.30pm GMT: The third estimate of US GDP in the third quarter will give the latest snapshot of the health of the world’s largest economy
- 1.30pm GMT: US weekly jobless claims figures will provide insight into America’s labour market