— Sterling falls to session low versus euro after data —
Britain's public sector net cash requirement rose unexpectedly last month compared to the same time a year ago, hitting its highest level for a June since records began in April 1984, official data showed on Tuesday.
The Office for National Statistics said the public sector posted a net cash requirement of 20.905 bln pounds in June, up from 20.213 bln last year and well above economists' forecasts for a fall to 15 bln pounds.
The figures are likely to disappoint analysts who hoped that the improvement in Britain's fiscal position would continue in June. However, for the year to date both PSNB and PSNCR are lower than they were at the same point in the last fiscal year, when Britain was still deep in recession.
Sterling fell to a session low against the euro after the data and also weakened versus the dollar.
"June's UK public finance figures put a bit of a dent in hopes that the fiscal position is now on a clearly improving trend," said Jonathan Loynes of Capital Economics.
Britain's new Conservative/Liberal Democrat government introduced an austere budget last month aimed at eliminating the budget deficit over the next five years. But this was not enough to persuade ratings agency Standard & Poor's to drop its negative outlook on Britain's triple-A debt rating.
"With the budget forecasts still relying on a solid recovery in the economy over the next year or two, worries about the UK's fiscal outlook have certainly not evaporated altogether," Loynes said.
British finance minister George Osborne said after the data that they reinforced the urgency of tackling the budget deficit.
ONE-OFFS
The public sector net cash requirement was reduced in June last year by a one-off effect from 2.302 bln pounds of privatisation proceeds related to the conversion into ordinary shares of preference shares in Lloyds Banking Group, in which the government has a large stake.
This was not offset by a modest rise in total cash receipts this June to 27.674 bln pounds from 26.684 bln the year before. That increase came mostly from a rise in value-added tax and duties on fuel, alcohol and tobacco, while receipts from income tax and national insurance fell.
For the tax year to date, all the above revenue categories were higher than at the same point last year.
"June has a number of erratic items and there's also been a marked reduction in net investment this month compared with a year ago," said David Page of Investec. "But we still think the public finances are on a repairing trend and we're not too alarmed that the number has come in above consensus."
Britain's total public sector net debt rose to 63.9% of GDP in June, the highest on record since this measure began in March 1993.
The government's preferred accruals-based measure of public sector net borrowing came in at 14.498 bln pounds, slightly below last year's level of 14.725 bln but also above economists' 13.1 bln pounds forecast.
In the last financial year, public sector net borrowing totalled 10.25% of GDP, the highest since records began in the 1954/55 tax year.
