UK debt up 418% since 1995 as it hits $3 trillion

By MarkMcSherry

The UK’s national debt has grown 418% since 1995, far faster than its European neighbours and far outstripping economic growth of 94%, according to the Sovereign Debt Index report from Janus Henderson Investors.

The UK owed $3 trillion by the end of 2020, equivalent to 113% of its national income, placing it towards the top end of most indebted countries and in line with comparable nations like France and Canada, the report said.

“The biggest contributor has been the GFC (global financial crisis) which hit the UK much harder than it did Europe and prompted huge borrowing,” said Janus Henderson.

“Britain now owes $44,559 per person, the ninth most in the world.

“During 2020 the British government borrowed almost $8,500 per person to combat the pandemic and its economic impact.

“It will continue to see debts rise for the next few years in cash terms, but they will become smaller relative to national income more quickly than for the rest of the world.”

The report said that globally, government debt rose $9.3 trillion to $62.5 trillion during 2020, with central banks now owning 24% of global government debt.

Central banks purchased half of 2020 government borrowing globally.

Central banks buy bonds and other assets in exchange for newly created money as a means of increasing liquidity in the economy — to keep interest rates low and support economic activity.

The report estimated 2021 will see government debt globally rise by another $4 trillion.

“Incredibly more than half (52%) of all new government borrowing in 2020 was paid for with newly minted cash from central bankers,” said the report.

“This proportion was obviously much higher in the countries that have active QE policies.

“In the US, 85% of 2020 borrowing was provided by the Federal Reserve, while in the UK two thirds was funded by the Bank of England.

“In Japan, where the pandemic has been less severe, the Bank of Japan furnished one third of the government’s 2020 borrowing needs.

“The picture is more complex in Europe given the shared use of the ECB, but it has been very large there too.”