UK borrows less than expected in November but Reeves still under pressure

By Andy Bruce

(Reuters) -Britain ran a smaller-than-expected budget deficit last month but only because past falls in inflation pushed down interest paid on government bonds, a limited boost for finance minister Rachel Reeves following her budget announcement.

The Office for National Statistics said on Friday that public sector net borrowing in November was 11.249 billion pounds. Economists polled by Reuters had a median forecast of 13 billion pounds for headline public sector net borrowing.

The data showed Reeves still faces a tough challenge to meet the new fiscal rules she announced in the Oct. 30 budget, with the economy losing more momentum than expected and inflation rising by more than expected again.

Government borrowing has come in higher than economists polled by Reuters in eight out of 11 months during 2024 and the reading for October was revised up by more than 800 million pounds.

The lower-than-expected deficit in November reflected a 1.8 billion pounds reduction in the compensation applied to the government's inflation-linked debt as the retail price index fell 0.3% during September.

That drop fully unwound in October and November.

($1 = 0.7999 pounds)

(Reporting by Andy Bruce; editing by William James)