UK Deficit Jumps to 38% of GDP

123jump.com Staff
18 Jul, 2008
New York City

UK budget deficit at the end of June soared to 38.3% of GDP. The debt does not iclude loans to the BoE and Northern Rock. The sharp rise in debt is fueled by rising public expenses and rapidly slowing economic expansion. The government hopes to keep debt below 40% of the GDP and lowe than 43 billion pounds, which increasingly looks difficult to achieve. Aberdeen asssets under management rose nearly 5% at the end of June quarter.

[R]1:00PM New York, 6:00PM London - UK budget deficit increases to £7.6 billion in June and 38.3% of GDP. The debts do not include debts to BoE and Northern Rock.[/R]

Stocks in London traded in positive territory buoyed by financial stocks after Citigroup earnings were above analysts’ expectations. However commodities trimmed losses as oil futures fell for the third day in a row with a total loss of 11%. UK budget deficit soars to the widest level in nearly 52 years.

Market Sentiment

In London trading FTSE 100 rose 1.7% or 90.1 at 5,376.40.

Of the 102 FTSE 100 stocks 72 rose, 27 declined, and 3 were unchanged. Wolseley led advancers in the index shares followed by Barclays gaining 10.24%.

UK Budget Deficit Widens

The Office of National Statistics reported on its Web site today that the country’s public sector current budget deficit in June was £7.6 billion, which is £2.3 billion higher than the deficit in the same period a year ago when the deficit topped £5.3 billion. At the end of June, the net debt was £555.3 billion or 38.3% of gross domestic product.

The government hopes to hold the deficit below 40% of gross domestic product level and below £43 billion. The net debt at the end of June stood at 38.3%, highest since 1999 level of 37.3% but lower than 45% in 1997. The debt as a percentage to the deficit fell to the lowest in recent years near 30% during the years 2002 and 2003.

The debts to Northern Rock and the Bank of England are not included. Including two debts the net debt as percentage of GDP rises to 44% and £640 billion.

In the three months to June, the shortfall was £24.4 billion and the public sector net borrowing was £2.9 billion higher than the net borrowing £9.2 billion and the net cash requirement stood at £15.5 billion.

The ONS also added that public sector current budget was in deficit by £20.4 billion, £7.9 billion more than the comparable period a year earlier.

The UK budget deficit is likely to reach 3.4% of the GDP in the current year, below many industrialized nations including projected deficit in the U.S. above 5% and in Japan near 2%.

Citigroup Loss of $2.5 billion

Citigroup reported today the second quarter loss of $2.5 billion, or 54 cents per share, from a profit of $6.23 billion, or $1.24 cents per share last year, as credit costs soared to $4.5 billion and write downs spiked to $7.5 billion.

Analysts had earlier forecasted a loss of more than $4 billion.

The lender’s revenues during the review period declined 29% to $18.7 billion as investment banking revenues slumped 71% to $2.94 billion. However, revenue for retail banking was unchanged at $7.89 billion.

Gainers & Losers

Wolseley led advancers in the FTSE 100 index shares with a rise of 14.44% followed by increases in Barclays of 10.24%, in Lloyds TSB Group of 10.15%, in Royal Bank of Scotland of 10.08%, and Schroders of 9.76%.

Financial stocks rose after Citigroup earnings cheered the market.

Ferrexpo Plc led decliners in the FTSE 100 index shares with a fall of 8.24% followed by losses in Eurasian Natural of 5.82%, in Lonmin Plc of 4.14%, in Petrofac of 3.9%, and Wood Group of 3.67%.

Commodity stocks fell as rebounded by $1.1 at $131 a barrel but still remained at low levels. Gold traded was also trading at $960.50 a troy ounce from $962.10 yesterday. BHP Billiton shed 1.84%, Vedanta declined 1.39%, Rio Tinto plummeted 1.27% and Kazakhmys plunged 2.87%.

Aberdeen Asset Management Rise to £113.7 billion

Aberdeen Asset Management reported on its Web site today in its interim management statement that company’s assets under management rose to £113.7 billion in the quarter to June as new funds of £5.6 billion were added.

Martin Gilbert, Chief Executive of Aberdeen, said, “Despite these challenging market conditions, we continue to win new business across the Group’s core asset classes and increase assets under management. At the same time, we are focusing on increasing our efficiency as a business and have identified £57 million of annualized cost savings.”

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 84.25 or 0.65% to 12,803.70, Hang Seng index in Hong Kong increased 139.47 or 0.64% closed to 21,874.19. ASX 200 index in Australia decreased 60.60 or 1.24% to close 4,840.40. The KL Composite index in Malaysia decreased 16.13 or 1.44% closed to 1,105.04.

The Kospi Index in South Korea decreased 15.57 or 1.02% to close at 1,509.99, SET index in Thailand closed lower 5.45 or 0.81% to 664.52 and JSE Index in Indonesia decreased 26.58 or 1.23% to 2,141.14. The Sensex index in India increased 523.55 or 3.99% to 13,635.40.

Europe Markets Review

In London FTSE 100 Index closed higher 90.10 or 1.70% to 5,376.40, in Paris CAC 40 Index increased 73.37 or 1.74% to close at 4,299.36 and in Frankfurt DAX index higher 111.38 or 1.78% to close at 6,382.65. In Zurich trading SMI increased 88.15 or 1.31% to close at 6,827.31.