Pound falls as government borrowing higher than hoped in June

Sterling fell against the euro and dollar in mid-morning deals as new data showed government debt is not falling as fast as hoped.

The pound was 0.16% lower against the dollar at $1.5202, having been as high as $1.5309 earlier.

Tiffany Burk, European Market Analyst at Travelex Global Business Payments. said: 'This is the biggest public sector net cash requirement for June since records began in 1984 and it is helping to send the pound lower in trading this morning.' 

Sterling was 0.09% lower against the euro at €1.1748 as official data showed public sector net borrowing was £14.5 billion in June 2010, higher than the £14 billion most economists had been looking for. That brings net government debt to £926.9 billion, equivalent to 63.9% of gross domestic product.

The current budget deficit was £12.6 billion in June.

With May's borrowing figure revised higher, the deficit for the first three months of the year was £40.3 billion, only a touch lower than the £40.9 billion figure recorded this time last year.

The data will make difficult reading for chancellor George Osborne as it does little to ease the pressure to cut back spending as part of his ambitious plan to cut the deficit to 1.1% of GDP by 2015-16,

Howard Archer, chief European economist at IHS Global Insight said: 'The disappointing June data is likely to reinforce the government's determination not to ease up on its austerity efforts - especially as Standard & Poor's have maintained their negative outlook on the UK's AAA rating.'