Economic Perspectives –

Record public sector borrowing in FY2020, whilst economic activity continues to recover

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


26th April 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK economic developments:

  • Public sector net borrowing (PSNB) for FY2020 was estimated to be £303.1bn, the highest on record, compared with £57.1bn in FY2019. It was, however, down on the OBR’s March 2021 forecast of £327.4bn (excluding estimates for write-offs of business loans).
  • Central government receipts fell £34.0bn (YOY, 4.5%) in FY2020, whilst central government expenditure rose £220.2bn (YOY, 27.1%).
  • Public sector net debt rose to £2,141.7bn by end-March 2021, 97.7% of GDP, maintaining a level not seen since the early 1960s.
  • Retail sales jumped 5.4% (MOM) in March, to be 7.2% higher YOY. They were, moreover, 1.6% higher than in pre-pandemic February 2020.
  • The latest Markit surveys suggested that private sector activity picked up strongly in April.
  • On the labour market, the unemployment rate unexpectedly slipped to 4.9% in the three months to February, even though employment fell. But this can be partly explained by a rise in the inactivity rate, especially for young people.  
  • The furlough scheme (due to end at end-September) continues to support the labour market. At end-February there were still 4.65 million on furlough.
  • Employment (Labour Force Survey data) slipped 73,000 in the three months to February, to be 643,000 down on a year earlier. PAYE data suggest pay-rolled employees in March 2021 were 813,000 down compared with March 2020.
  • Hours dipped in the three months to February, reflecting third lockdown restrictions, and the vacancies recovery has stalled in recent months (to March).
  • Annual earnings growth picked up in the three months to February to 4.5% for total pay and to 4.4% for regular pay. The ONS attributed part of the growth to the compositional effects of a fall in the number and proportion of lower-paid employees. Allowing for these effects they estimated that “underlying wage growth” was around 2.5% for both total and regular pay. 
  • CPI inflation picked up in March to 0.7%, reflecting higher fuel prices.
  • Producer prices, both output and input, picked up further in March, suggesting a build-up of “cost pressures” in the pipeline.
  • The ONS reported an acceleration in annual house prices growth to 8.6% (YOY) in February, compared with 8.0% in January. 

International update:

  • Markit surveys noted a very modest improvement in Eurozone activity in April, whilst US growth was robust.
  • The Governing Council of the ECB left its very accommodative monetary policy unchanged at its 22 April meeting.
  • Germany’s Constitutional Court dismissed the legal challenges to the EU’s recovery fund on 21 April, enabling Germany to ratify the necessary legislation.
  • Oil prices have been firm so far in April, after the agreement to maintain production curbs until May at the OPEC+ meeting on 1 April 2021. 

Ruth Lea said “Even though public sector borrowing for FY2020 came in lower than forecast by the OBR in March, this should not blind us to the significance of the enormous increase in borrowing during the year. On a brighter note, activity seems to be recovering quite well with a healthy increase in retail sales in March and some encouraging survey data for April from Markit. Suffice to say, future improvements in the economy will depend to a great extent on lockdown restrictions being lifted according to the PM’s roadmap or, preferably, quicker.”





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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