UK tax boost eases deficit as sales rise


ER-THAN-PREDICTED high street sales and unexpectedly low government borrowing figures gave UK markets a late summer fillip yesterday.

Shoppers defied talk of weakening consumer confidence to send the nation’s till receipts up 1.1 per cent between June and July, far ahead of the 0.4 per cent rise pencilled in by economists. The Office for National Statistics said clothes and non-food purchases powered the increase, jumping 4.1 per cent, with internet-based revenues soaring 16.7 per cent.

An improving corporate tax haul meant public borrowing levels also caught analysts unawares. The Treasury drew on £3.8bn net funds last month, less than the £5.3bn forecast by institutions and significantly below £6.1bn this time last year. Excluding the cost of bailing out Lloyds Banking Group and Royal Bank of Scotland, overall debt stood at £816.2bn or 56.1 per cent of GDP.

The FTSE 100 rose by up to 33.48 points in the morning as investors took heart from the data. But the large cap index fell back to close 91.58 points down at 5,211.29 as a shock leap in US jobless claims to 500,000 sparked a sell-off of risky assets. Markets were additionally spooked by a warning of “daunting” challenges from?America’s fiscal agency.

Nonetheless, Simon Ward, chief economist at Henderson Global Investors, said the UK’s healing economy and rising tax-take from companies meant the national deficit was likely to undershoot the Office for Budget Responsibility’s estimate of £149bn for the full year.