UK state debt tops £2 trillion after broad coronavirus support

National debt figure equates to more than Britain’s entire annual gross domestic product

Britain's Chancellor of the Exchequer Rishi Sunak said the Covid-19 pandemic had put significant strain on public finances. Reuters

British government debt has moved above £2 trillion (Dh9.65tn) for the first time after extensive state borrowing to support the embattled UK economy amid the coronavirus pandemic.

That equated to more than 100 per cent of the country's annual gross domestic product for the first time since 1961, according to figures released by the Office for National Statistics that refer to the situation at the end of July this year.

Compared with July 2019, UK debt increased by £227.6 billion (Dh1,098.92tn), reflecting the drastic increase in borrowing needed to tackle the pandemic.

The finance minister, Rishi Sunak, said the situation would have been far worse had the government not stepped in.

"This crisis has put the public finances under significant strain as we have seen a hit to our economy and taken action to support millions of jobs, businesses and livelihoods," he said.

Net borrowing from April to the end of July was estimated to have hit £150.5bn (Dh726.66bn), the ONS said.

Last month's figure alone came in at £26.7bn (Dh128.92bn), as the UK emerged from lockdown measures imposed at the end of March to curb the spread of the coronavirus.

"Today's figures are a stark reminder that we must return our public finances to a sustainable footing over time, which will require taking difficult decisions," Mr Sunak said.

"It is also why we are taking action now to support the growth and jobs which pay for our public service, by helping businesses to reopen safely."

Separate official data on Friday showed that British retail sales jumped by 3.6 per cent in July from June as shops, restaurants and pubs reopened.

"Retail sales have now regained all the ground lost during the height of the coronavirus restrictions as more stores open for trade and online sales remain at historically high levels," ONS statistician Jonathan Athow said Friday.

"While still below their pre-pandemic levels, both fuel and clothing sales continued to recover.

"Meanwhile, food sales fell back from their recent peaks as people started to venture back into pubs and restaurants," Athow added.

Britain's economy shrank by one fifth in the second quarter, more than any European neighbour, as the lockdown plunged the country into its deepest recession on record.

Even though the UK economy was beginning to rebound as the government eased strict confinement measures – private-sector output grew rapidly in August according to Friday’s data – analysts expected a surge in unemployment by the end of the year.

In October Mr Sunak plans to end the government's furlough scheme that is paying up to 80 per cent of wages for about 10 million workers during the pandemic.