U.K. Borrowing Lower Than Expected

The U.K. borrowed less in November compared with the same month last year as the government's tax take increased at a faster pace than its expenditure, official data showed Wednesday, but net debt still climbed to a record high.

The data suggest government borrowing is likely to be below the recently upwardly revised £127 billion target $200.2 billion) in the fiscal year ending March 2012, economists said. But concerns remain about the high levels of debt, with Moody's Investors Service Inc. warning Tuesday that the U.K. faces formidable and rising challenges, especially from the euro-zone crisis.

"It is clearly encouraging news for the chancellor [of the exchequer] that the deficit target can be reached or even beaten. However we are concerned that the rate of improvement could easily slow and possibly reverse given a deteriorating growth outlook," James Knightley, an economist at ING, said in a note.

Public-sector net borrowing totaled £18.1 billion ($28.5 billion) in November down from £20.4 billion in November 2010 but still the fifth-highest monthly value recorded since records began in 1993, the Office for National Statistics said. Economists were expecting borrowing of £19.8 billion.

The data showed that government receipts were 7.1% higher in November than during the same month last year due to a rise in value-added tax at the start of 2011 and stronger receipts from taxes on income and wealth. Total expenditure rose just 0.8% on an annual basis.

However, the U.K.'s net debt still climbed to a fresh record high of £977.1 billion in November, and public sector net debt as a percentage of gross domestic product excluding financial interventions also hit its highest ever level of 62.8%.

The U.K.'s public sector net cash requirement was £10.5 billion in November, down from £15.3 billion in November last year, the ONS said.

In late November Chancellor of the Exchequer George Osborne conceded that economic growth would be weaker and borrowing higher than expected so the government's painful austerity measures would likely go on for longer.

The Office for Budget Responsibility, the independent body that provides the government with economic analysis, raised its forecasts for public-sector net borrowing to £127 billion in the fiscal year ending March 2012, from £122 billion.

Net borrowing for the financial year to date totaled £88.3 billion, down from £98.7 billion over the corresponding period last year, the ONS said.

"November's public finances figures showed that borrowing is still coming in comfortably below last year's totals," Vicky Redwood, an economist at Capital Economics, said in a note. "But we still think that weaker growth will leave borrowing overshooting the OBR's forecasts further ahead."

read more: Olympus Wealth Management