UK economy hit as people shop less than pre-Covid

Official figures show a gloomy picture for the UK economy with government borrowing up and people shopping less than before the coronavirus pandemic.

Retail sales volumes fell more than expected by 1.4% last month, continuing their slide from August.

Meanwhile, government borrowing rose to its second highest September on record.

“Consumers are now buying less than before the pandemic,” said Darren Morgan, from the Office for National Statistics which released the figures.

He added: “Retailers told us that the fall in September was partly because many stores were closed for the Queen’s funeral, but also because of continued price pressures leading consumers to be careful about spending.”

Mr Morgan, director of economic statistics, said drops were seen across all types of shops with falling sales in food stores seeing the sharpest drop.

Meanwhile, the UK is borrowing billions of pounds to limit energy bill rises for households and businesses.

Borrowing – the difference between spending and tax income – was £20bn last month, up £2.2bn from a year earlier, the Office for National Statistics (ONS) said.

It is the second highest September borrowing since monthly records began in 1993, the ONS said.

The figure is lower than in September 2020, at the height of the coronavirus pandemic, when the government was borrowing to fund schemes such as furlough, it said.

But economists warned that government borrowing is set to rise further in the coming months.

“Government borrowing is set to enter an upward trajectory” says Michal Stelmach, senior economist at KPMG UK.

“We expect the fiscal position to only worsen from October onwards, with the government’s energy price guarantee for households and businesses in place, on top of the second cost of living instalment and the support for pensioners.”

The Chancellor, Jeremy Hunt, said: “To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead.

“We will do whatever is necessary to get drive down debt in the medium term and to ensure that taxpayers’ money is well spent, putting the public finances on a sustainable path as we grow the economy.”