Market Loop - UK’s record £70bn borrowing bill

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27th April 2022

Bite-sized business news from the UK and beyond

Good morning If you’ve ever wanted to tap into the mind of one of the most successful and prolific investors then you’re in luck. Billionaire investor Warren Buffett is auctioning off a private lunch for the first time since the pandemic to raise money for a homeless charity.

He’s held the auction, dubbed the world’s most expensive lunch, once a year for 20 years with the last winning bid reaching $4.5m. If that seems steep, then the good news is that the winner will get to bring up to seven people which works out at a mere $563k per person.

Today's stories

Getting interesting – UK’s record £70bn borrowing bill
Spending spree – Starling Bank bags £130m in latest funding round

ECONOMY
UK’s record £70bn borrowing bill

What’s going on?
Latest figures showed that in the 12 months to March the interest payments on the national debt - the accumulation of borrowing over time - more than doubled to a record £70bn.

Why is this important?

Covid has had a huge impact on the economy and government borrowing. Although borrowing has started to fall, it’s still above pre-pandemic levels.

Data released yesterday from the Office for National Statistics paints a mixed view of the UK economy.

On the one hand: the past year has seen the UK come out of Covid restrictions and the end of costly measures such as furlough and the track and trace system. This has reduced the government’s need to borrow and the budget deficit - the gap between the tax revenues and public spending - fell by more than half to £151.8bn.

On the other hand: the national debt now stands at £2.3tn or 96% of the UK economy – the highest level since the 1960s. Around £500bn of the debt pays interest linked to the retail price index – a measure of inflation - which stands at 9% and could soon reach double digits. The rise in inflation has led to a record £70bn in annual interest payments.

Zooming out

Overall, public finances are in a better position than they were a year ago with the economy fully reopened post lockdown. Even though spiralling energy prices and the war in Ukraine are now hampering economic growth, economists expect the budget deficit to reduce to around £100bn in the coming year as the government pulls back on Covid-related support packages.

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Heathrow Airport says no profits this year as travel remains turbulent
HSBC’s profits drop 28% amid Ukraine war fallout

FINTECH
Starling Bank bags £130m in latest funding round

Challenger banking app Starling has raised £130.5m to fund growth by buying other companies.

Founded in 2014, the London based fintech provides personal and business accounts and payments services, and now has 2.8m UK customers.

The new funds came from existing big name investors including Goldman Sachs, Fidelity and the Qatar Investment Authority.

Although Starling hasn’t said which companies are on its target list, last year the bank announced its first acquisition – buy-to-let mortgage specialist, Fleet Mortgages. The deal, worth £50m, is part of the company’s plan to expand into lending.

Last year Starling reached unicorn status – a total valuation of over $1bn – when it raised £322m in investment. The new funding means the company is now worth £2.5bn. It has said in the past that it would aim to become publicly listed company by 2023.

Unlike a lot of banking app startups, Starling has been profitable for almost two years and last year saw its revenues jump by 600% to £98m.

Stat of the day

The investment banks advising Twitter on their takeover by Elon Musk could earn up to $130m in fees

Interesting links from around the web

7 hidden iPhone keyboard features you probably never knew existed
How Netflix's quest to end password sharing might work
Bill Gates, Jeff Bezos and Elon Musk get a lot of airtime but who are America’s silent billionaires

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Market Loop - UK’s record £70bn borrowing bill

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