Business live blog: UK government borrowing falls - as it happened

Katie Allen

from on 2015-07-21 17:05 (#EYZ2)

As things quieten down in Greece we turn our attention back to the UK where official figures show an improvement in government borrowing in June

Closing summary: Austerity, accounting scandals and a pause for gold
UK public finances improve - but by less than expected
European shares edge lower as relief rally peters out

6.05pm BST

European stock markets have closed lower today, after momentum ebbed out of the recent relief rally on signs of a resolution to the Greek debt crisis.

Attention will return to the Greek parliament on Wednesday where MPs are voting on new legislation demanded by the country's creditors.

5.13pm BST

News is emerging this afternoon that UK bank Barclays may have been approached about signing a deferred prosecution agreement (DPA) relating to the Serious Fraud Office's (SFO) probe into its fundraising during the 2008 financial crisis.

"We are not in a position to comment on an ongoing legal matter, save to clarify that there has been no offer made of a DPA."

4.47pm BST

As Greece gears up for tomorrow's vote in parliament on two new laws, analysts are asking how the political landscape might change over coming months.

Deutsche Bank strategist and regular Greece observer George Saravelos has just put out a new report asking "Is the crisis over?"

Irrespective of the near-term outcomes ... the inherent contradiction of programme implementation by a government from within which the bulk of opposition originates will have to be resolved. It is unlikely that uncertainty around the stability of the Greek economy and banking system recedes until this is the case.

Resolution could be led by Greek PM and current party president [Alexis] Tsipras moving SYRIZA in a more moderate direction followed by an early general election later this year after ESM [European stability mechanism] negotiations have concluded. This would increase the odds of a government with greater commitment to implementation, irrespective of the electoral outcome. It would however risk a major splintering of the party or Tsipras' own loss of authority in the process.

4.27pm BST

Over in the US today, investor focus is on updates from big technology companies, including Apple, Microsoft and Yahoo.

When Apple reports quarterly earnings after the closing bell, all eyes will be on its watch sales. But, as my Guardian US colleague Sam Thielman reports, there may not be much to see.

Analysts have called for caution ahead of Apple's earnings call today, during which the company is expected to give its first official indication of Apple Watch sales figures since they went on sale in April. However, Apple will probably leave the exact revenue for the product in the "other" category and few are expecting detailed figures for an Apple product that has got off to a mixed start.

"Even if Apple comes out on the low end, everybody else wants to have those numbers," said Ramon Llamas, who analyzes the phones and wearables market for market research firm IDC. "Everyone want to have those numbers even if they're low, because everyone wants to crack that 1m unit barrier."

4.06pm BST

Back at the Treasury Committee, George Osborne has been asked about the UK's role in any potential eurozone bailouts. This follows on from the chancellor's insistence last week during negotiations over the bringing loan for Greece that he would oppose any deal in which UK taxpayer cash was put on the line, arguing that the "eurozone needs to foot its own bill".

In the event, he backed down over the use of an EU bailout fund to give the emergency loan to Greece.

"I can give the committee that assurance because of the agreement we reached within the last week."

3.41pm BST

Looking ahead to Wednesday now and the release of the minutes from the latest Bank of England meeting on interest rates - where they were held at 0.5%.

"We expect the minutes to show continued unanimity for unchanged policy (split voting might start in August), but we will be looking for clues on whether the MPC is edging closer to tightening, not least on the back of strengthening wage data."

We'll be watching for more monetary policy commentary, but we don't expect a split vote in the MPC minutes yet. We expect two MPC members to again describe the decision as finely balanced. If some of the recent MPC speeches are anything to go by, the overall tone or emphasis of the minutes will probably be a bit more hawkish than in June.

3.05pm BST

Shortly after the opening bell on Wall Street the main share indices have edged down, in line with moves in Europe today.

2.20pm BST

George Osborne has just started giving evidence to the Treasury Committee on his summer budget from earlier this month.

You can watch it live here

1.47pm BST

Time for a brief summary of business and economics news so far today, which has been largely dominated by the UK public finances and chancellor George Osborne's latest austerity push plans.

1.27pm BST

For regular followers of our Greek coverage, if you are missing former finance minister and maverick economist Yanis Varoufakis, you will be pleased to hear he has secured a regular slot on the Project Syndicate site.

Big news! We're launching a new monthly column series by @yanisvaroufakis. Read his latest http://t.co/rGxFExM3iO pic.twitter.com/yaO0V15vuT

1.16pm BST

Another day, another Greek deadline to add to the diary. This time, seemingly a self-imposed one by Greece.

Athens hopes talks with its international creditors on a new bailout package will be wrapped up by 20 August, the government's spokeswoman is quoted as saying on Reuters.

The negotiations will start after parliament votes on Wednesday on a new set of reforms required by international lenders, spokeswoman Olga Gerovasili said a statement.

"Immediately after the vote of the prior actions, negotiations with the lenders will start, with August 20th being the final date," she said.

As expected... this means the group formerly known as the troika will soon be returning to Athens. https://t.co/jYD0cNbx2O

12.46pm BST

An update from Royal Mail today suggests emails continue to take their toll on letter deliveries.

Royal Mail failed to increase sales in the first three months of its financial year as letter revenues fell amid "challenging" trading conditions, the Press Association reports.

12.42pm BST

Trades union group, the TUC, has sent through a reaction to this morning's official figures showing UK public sector borrowing fell in June but by less than expected.

"After the longest recorded squeeze on living standards, income tax revenues and national insurance receipts are still way down on expectations. With interest rates on government borrowing at rock bottom, this is the perfect opportunity for the chancellor to invest in skills, infrastructure and much-needed affordable housing. But rather than learning from his mistakes the chancellor cut back on infrastructure spending in the budget.

"We need a better plan for sustainable high-productivity growth that will deliver the quality jobs and decent services working people need."

12.29pm BST

Back in the UK, chancellor George Osborne has launched his 2015 spending review, billed as "the next stage in the government's plan to fix the nation's finances."

For already slimmed down government departments that means letters are in the post with words to the effect of: 'Must do better.'

Spending Review will be published on 25 November 2015 http://t.co/qlPcbOD8zE pic.twitter.com/Ljsrzc5x0v

"With the fastest-growing economy in the G7, and employment at near-record levels, the chancellor is clear that now is the time to finish the job of fixing the public finances.

"At the Summer Budget, the chancellor took the first step towards finishing that job, setting out how the government would ensure Britain runs a surplus for the first time in almost twenty years in 2019/20, delivering economic security for working people.

12.19pm BST

Slovak prime minister Robert Fico has been talking tough on Greece this morning, saying his country will be among the first to ask Greece to leave the euro zone if it fails to adhere to agreed conditions of further austerity.

12.12pm BST

Jeffrey Frankel, professor of capital formation and growth at Harvard University, has been asking whether Greek prime minister Alexis Tsipras could become the new Lula - the Brazilian leader who successfully confronted financial constraints.

The Greek prime minister, Alexis Tsipras, has the chance to become to his country what the South Korean president, Kim Dae-jung, and Brazilian president, Luiz Inicio Lula da Silva, were to theirs: a man of the left who moves toward fiscal responsibility and freer markets. Like Tsipras, both were elected in the midst of an economic crisis. Both immediately confronted the international financial constraints that opposition politicians can afford to ignore.

On assuming power, Kim and Lula were able to adjust, politically and mentally, to the new realities that confronted them, launching much-needed reforms. Some reforms were "conservative" (or "neo-liberal") and might not have been possible under politicians of the right. But others were consistent with their lifetime commitments. South Korea under Kim began to rein in the "chaebols", the country's huge family-owned conglomerates. Brazil under Lula implemented "Bolsa Familia", a system of direct cash payments to households that is credited with lifting millions out of poverty.

12.06pm BST

New figures on flight bookings to Greece suggests there was a sharp drop in recent weeks as holidaymakers reacted to the turmoil caused by the debt crisis. But there has been a small reocvery in the latest week.

"Our data shows that Germany and the USA continue to lead the decline in bookings to Greece, and the over 40% fall is particularly worrying because of their high market share.

"What is encouraging is that our analysis shows in the third week of July, overall bookings saw some recovery, moving from -44% to -35%."

11.28am BST

In Brussels, our reporter Jennifer Rankin has been considering the political challenges that lie ahead as Greece hopes to kickstart talks on a new bailout package. She writes:

The Greek debt crisis is no longer on the front pages, but plenty of work goes on as Greek authorities race to meet the conditions laid down by their eurozone creditors to secure a new bailout.

On Wednesday the Greek parliament will vote on two new laws - on banking reform and changes to Greece's civil code. These are among the final hurdles Greece has to clear before embarking on talks aimed at securing a proposed a86bn (60bn) bailout.

11.18am BST

Sticking with Greece, there has been a spike in the number of Greek workers searching for jobs in the UK, according to one jobs site, something that will come as no surprise perhaps to many of our readers there.

10.49am BST

Sticking with austerity drives, but turning to Greece, in Athens today the government has submitted legislation to parliament that has been demanded by the country's creditors in order to get talks on a new bailout package underway.

Prime Minister Alexis Tsipras has until Wednesday night to get the measures adopted in the assembly. A first set of reforms triggered a rebellion in his party last week and passed only thanks to votes from pro-EU opposition parties.

The second bill, though less divisive, will still be a test of his weakened majority.

10.39am BST

Business lobby group, the British Chambers of Commerce, says despite progress in cutting the UK deficit, "major challenges" remain for the government.

Its chief economist David Kern says:

"We must not understate the big challenges that the UK faces in restoring stability to our public finances. Britain's financial sector was hit hard in the recession and, together with lower oil and gas output, our ability to generate tax revenues has been seriously constrained. Therefore, we have to continue to focus on other means to tackle the deficit - including cutting current government spending.

"The government must also put more emphasis on policies that will boost economic growth, most obviously infrastructure investment and supporting exports. Only by doing this will the UK be able to create an enterprising economy which can deliver sustained growth over the long-term."

10.30am BST

Reactions are coming in from economists to those public finance figures, which showed another improvement with borrowing down, but not by as much as the City had forecast. Experts highlight signs an improving economic backdrop is starting to come through in the government's finances. While it is not quite the picture the government's fiscal watchdog, the Office for Budget Responsibility (OBR), had pencilled in, they see little reason for alarm, yet.

Howard Archer, economist at IHS Global Insight says George Osborne will probably be pleased to see the shortfall on the public finances narrow for a sixth month running.

Improved income tax receipts continue to underpin the improvement in the public finances, reflecting a pick-up in earnings growth as well as higher employment. However, June's increase of 2.5% year-on-year in income tax related payments was less than the recent increases.

There was a particularly marked rise in Value Added Tax receipts in June reflecting the recent strength of retail sales. Additionally, corporation tax receipts were up13.9% year-on-year in June...

"The overshoot in borrowing relative to the official forecasts entirely reflected stronger growth in current spending (2.9%) than the OBR expects (1.0%), rather than economic weakness. Indeed, annual growth in tax receipts of 4.4% slightly exceeded the OBR's forecast of 4.1%.

"June's poor borrowing figure means that borrowing in the first three months of the fiscal year of 25.1bn was 31.3bn (20%) lower than last year. If this trend persists over the remaining nine months of the fiscal year, this year's deficit would be 71.5bn, 2bn higher than the OBR forecast in the Summer Budget. However, estimates for borrowing in the first few months of the fiscal year should be taken with a pinch of salt, given that they are based on more forecast data than those for later months. Accordingly, we do not think that June's borrowing figures should ring any alarm bells yet."

10.14am BST

Unsurprisingly, the Treasury has welcomed the latest improvement in the public finances.

A spokeswoman sends through this comment:

"Today's figures show that our deficit reduction plan is working, with cumulative borrowing over 6bn lower than at this point last year. We have more than halved the deficit, but with debt over 80% of GDP the job is not done.

"That is why we will continue to work through our long term plan to achieve a budget surplus in normal times and secure a better economic future for working people."

Read our response to today's @ONS monthly Public Sector Finances statistics for June 2015: pic.twitter.com/xGweBXVTK3

10.00am BST

Picking out some of the highlights from those UK figures on the state of the public coffers in June:

9.39am BST

The Office for National Statistics says that 0.8bn, or 8.3%, reduction in borrowing on a year ago came as income tax receipts rose to the highest level since records began in 1997. Corporation tax was also the highest amount on record.

9.4bn PSNB Ex in June 2015, down 0.8bn compared with June 2014 http://t.co/uJXKdDuAST

9.34am BST

Official figures just out show UK public sector borrowing fell again in June but by less than expected.

Public sector borrowing fell to 9.4bn in June from 10.2bn a year ago. The consensus forecast in the market was for borrowing to fall further to 8.5bn, based on a Reuters poll of economists.

9.26am BST

European shares have edged lower in quiet trading this morning as the momentum from Monday's relief rally peters out.

The FTSE 100 in the UK, Germany's Dax is flat and France's CAC40 are all down between 0.1 and 0.2%.

"Now that the Greek problem has been kicked into the long grass, the key question for investors is whether the recent gains in European equity markets are simply a relief rally - or whether fears over Greece obscured a wider improvement in European economies and there is still significant value to be found?

On top of the effects of the ECB's quantitative easing (QE), the Greek crisis has left the euro considerably weaker than it otherwise would have been. Greek fears also depressed company valuations. Nevertheless, European exporters should benefit significantly from the weak euro, while the financial sector should benefit from the effects of QE. As a consumer of energy and raw materials, Europe should also benefit significantly from the recent drop in commodity prices.

9.12am BST

The big corporate news of the day is that Toshiba's chief executive and president, Hisao Tanaka, and his predecessor, Norio Sasaki, have quit over a $1.2bn accounting scandal.

9.02am BST

Good morning and welcome to our rolling coverage of business and economics news from the UK, the eurozone and beyond.

Things appear to have quietened down after a frantic month in Greece and on Monday banks re-opened after a three-week closure. Using a bridging loan, Athens also started to repay its debts to international creditors and the International Monetary Fund declared Greece was no longer in arrears.

"June's public finances figures look set to show much lower borrowing than a year ago. Indeed, government departments may have already begun to find the 3bn extra savings that the chancellor asked them to deliver this year. We have pencilled in borrowing of just 8bn in June, versus 10.4bn in June last year."

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