UK Budget deficit lower than expected in May

- Muted market reaction as all eyes on Tuesday's budget -

Date: June 18, 2010

The UK’s budget deficit was lower than expected in May, according to the Office for National Statistics. The public sector posted a net cash requirement of £11.963 billion last month, below the expected £20.25 billion reading. The UK’s budget deficit now stands at around 62% of GDP –it’s highest ever reading.

Mark Bolsom says, “As economic recovery gathered pace in May, private sector spending improved, which is why borrowing undershot forecasts. The key thing now is Tuesday’s first Conservative-Liberal budget – we know Osborne is going to cut borrowing – but that will have a negative knock on effect on revenues.

“The markets have barely reacted to the news, as the data merely confirms Monday’s report from the Office for Budget Responsibility. All eyes also remain firmly on the on Tuesday, where we expect Osborne to take a tough stance.”

Sterling remains steady in trading this morning – slightly up against the dollar at $1.4863 and 1.1993 against the euro.

- Ends -

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