Market UpdateJanuary 24 2020

Fortnightly Thoughts: Paul Staples, Managing Director of Corporate Finance, on Government borrowing

2 mins read

Paul Staples

Managing Director, Corporate Finance

Government borrowing has fallen to its lowest level in 17 years, according to official figures. 

A rise in tax receipts helped to lower net borrowing to £24.7 billion over the financial year, which was £17.2 billion less than in the previous year and the lowest since 2001-02.

Borrowing for the month of March came in at £1.7 billion, £900 million more than in 2018.

These statistics were shown in the Times and Managing Director of Sandaire Corporate Finance, Paul Staples, addresses these statistics and looks at the implications to the UK M&A market. 

“There is a widespread expectation that the convincing election victory by Boris Johnson will lead to a resetting of government economic policy, including a significant increase in infrastructure spending coupled with measures to accelerate regional growth outside London. This belief may also have been strengthened by figures released towards the end of last year, signalling a lower than expected level of short term government  borrowings.  Together with the arrival of a new Chancellor, the business community has become curious to see exactly how the government intends to drive economic growth in parallel with the ongoing trade agreement negotiations with Brussels. Moreover, most of Britain’s leading banks have been expressing the view that they would like to see accommodating investment policy support from the Treasury to ameliorate the effects of low real interest rates and negative bond yields in some instances. 

This could provide a positive backdrop to the UK M&A market as it seeks to recover some of its poise during the start of the new decade. Whilst details of the government’s new approach have yet to be finalised, the level of reverse enquiry from clients regarding potential transaction opportunities has been rising since the inauguration of the new Conservative administration. It will be interesting to see how the new political mood influences the direction of travel for UK investment activity within the next twelve to eighteen months.”