British govt borrowing improves ahead of budget

UK government borrowing fell by more than expected in September but remains elevated on Covid, official data showed Thursday ahead of next week's budget announcement.

Finance minister Rishi Sunak welcomed the upbeat news as he prepares to deliver his tax and spend plans on Wednesday.

Public sector net borrowing slid to 21.8 billion ($30.1 billion, 25.8 billion euros) last month, the Office for National Statistics said in a statement.

The improvement was driven by falling Covid-related expenditure and rising tax receipts as the economy starts to recover.

The monthly borrowing was nevertheless the second highest level for September since records began, after 28.8 billion in the same month one year earlier.

"Our recovery is well underway... but the pandemic has had a huge impact on our economy and caused our debt levels to rise," Sunak said.

"At the budget and spending review next week I will set out how we will continue to support public services, businesses and jobs while keeping our public finances fit for the future. "The British economy had rebounded in August despite ongoing supply chain woes and labour shortages, after shrinking slightly in July.

The ONS added that state interest payments hit 4.8 billion in September as high inflation bites.

The interest payments matched the level a year ago despite lower borrowing as the high inflation led to higher interest rates.

A recent spike in government bond yields is meanwhile expected to push repayments higher in the coming months.