Britain risks ‘explosion’ in national debt

Economic Overview - The UK economy has contracted by 0.1% in October, following a similar decline in September and no growth in August [1][2] - Unemployment has risen to 5.1%, marking the highest level in nearly five years [3][104] - Public sector wage growth has reached a record high of 7.6%, nearly double the 3.9% increase in the private sector [51][93] Debt and Fiscal Concerns - The Chancellor has borrowed £116.8 billion this financial year to cover the gap between tax receipts and public spending [1] - The Office for Budget Responsibility (OBR) warns that the UK's debt-to-GDP ratio could exceed 270% by 2073-74 if current trends continue, with a forecast of 96% by the end of the decade [4][7] - Debt interest payments are expected to remain above £100 billion annually for the rest of the decade [9] Job Market Dynamics - The job market is showing signs of cooling, with public sector wage growth outpacing the private sector [2][51] - The number of redundancies has increased significantly, with 156,000 reported in the three months to October, the highest since the pandemic [94] - Private sector employment has declined for the 15th consecutive month, indicating a persistent downturn in hiring [62][68] Monetary Policy Implications - The Bank of England is anticipated to cut interest rates for the first time since August, with expectations of a reduction from 4% to 3.75% [96][105] - Analysts suggest that the Bank will adopt a cautious approach to future rate cuts due to strong public sector wage growth [50][54] Market Reactions - UK stocks have experienced declines in response to rising unemployment and a weakening jobs market [20][86] - The FTSE 100 index fell by 0.8% as investors reacted to the latest employment data [20][86]