E3: UK government borrowing to surge as Covid-19 recession hits - business live

Rolling coverage of the latest economic and financial news, as Britain outlines plans to issue £225bn between April and July to cover coronavirus spending

Newsflash: The eurozone economy is suffering the steepest falls in business activity and employment ever recorded this month, as it sinks into recession.

The eurozone-wide composite PMI, just released, has hit an all-time low of 13.5 in April, down from a prior record low of 29.7 in March.

The eurozone economy suffered the steepest falls in business activity and employment ever recorded during April.

Europe isn’t alone, of course. Earlier today, Japan’s PMI survey dropped to alarmingly low levels:

Wow! #Japan's Services #PMI collapsed to just 22.8 in April. pic.twitter.com/VgLbPEV6D7

"A devastating services report, but we see light at the end of the tunnel in manufacturing" @freyabeamish @mc_economist on #Japan Flash PMIs, April #PantheonMacro

We have gone from PMIs in 20s, teens and now shoe sizes https://t.co/73Hqfk8pQR

The unprecedented slump in French and German growth this month has knocked the euro.

The single currency has dropped below $1.08 for the first time in over two weeks, down 0.3% today.

$EUR not liking April PMI readings out of Germany & France. Sign that markets beginning to respond to data. Divergences to appear going forward based on speed at which economies bottom & turn the corner. For now risk on the backfoot as data shows size of contraction to be brutal pic.twitter.com/kCPCtABAj1

NEWSFLASH: The French and German economies are contracting at an unprecedented rate this month under the lockdown.

Data firm Markit’s latest surveys of purchasing managers, just released, shows that business activity in both countries slumped dramatically.

French private sector activity continued to plunge in April, with ongoing business closures stifling both supply and demand.

2. France preliminary April PMI at 11.2. pic.twitter.com/oEuujKq7EJ

The decline in business activity across Germany deepened in April, with both services and manufacturing seeing record decreases in output as a result of the COVID-19 pandemic and subsequent lockdown....

Businesses reported a collapse in demand from clients both at home and abroad in April. The rate of decline in overall inflows of new work far exceeded the previous record seen in March, with new business received from abroad falling at a similarly sharp pace. In both cases, the decline was led by the service sector

More gloomy news from Eurozone: #Germany's Apr Flash Comp PMI falls to 17.1 from 35 in March, lowest reading since series began. German Apr Services PMI PMI crashes to 15.9 vs 28 expected. pic.twitter.com/YfvyYD2d09

To put today’s plans into context, the UK only grew its national debt by £48.7bn in the last financial year:

Borrowing in the full 2019 to 2020 financial year was £48.7 billion, £9.3 billion more than the previous year and £1.3 billion more than the Office for Budget Responsibility forecast https://t.co/m3MobvO6PZ pic.twitter.com/B8ICxYdB2T

Today’s borrowing plans have brought home just how eye-wateringly expensive the Covid-19 lockdown will be.

Duncan Weldon of The Economist points out that the UK will now borrow more in four months than it previously planned for the whole financial year.

New UK gilt issuance timetable.
Yes, £225bn in four months is *a lot*.
Context: the original financing plan for all of financial year 2020/21 (as published at the budget a million years ago/last month) was £162bn. pic.twitter.com/CKIEIi8DFK

A lot of debt for years and years to come...@hmtreasury says it wants to raise £225bn in April to July by selling bonds (that’s Govt debt).

The pre-Coronavirus plan was to raise around £160bn for the whole year. pic.twitter.com/IWgLYdMzgF

Wow. The UK will raise £180 billion in government bond sales in just THREE MONTHS between May and July

Breathtaking numbers

HM Treasury also confirms all financing requirements will be through normal channels - ie the Debt Management Office selling Gilts.

Expected that much more borrowing will be done in the first 4 months of fiscal year (starts April) and not expected to continue for rest of year

So totals:

April: £45bn
May-July: £180bn
Total Apr-July: 225bn

The UK has announced plans for a massive surge in borrowing over the next few months, to cover the cost of the Covid-19 pandemic.

Britain’t Debt Management Office says it plans to issue £180bn of bonds between May and July.

This remit revision takes into account implications for the government’s financing requirement of all measures announced by government to date to support the economy through the period of disruption caused by COVID-19.

Wow. If you want to know how much Covid support is costing look at HMG's revised gilt issuance today. £225bn in total, in first four months of financial year. £45bn for April was already a record, now another £180bn May-July

“This higher volume of issuance is not expected to be required across the remainder of the financial year.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A fresh blizzard of data today will show us just how badly the world economy is suffering from the Covid-19 downturn.

Sentiment clearly remain fragile and that could be magnified with the release of the PMI readings for the UK and Eurozone.

The service sector accounts for 80% of UK economic activity. In March the UK service sector contracted at the fastest pace on record, dropping to 34.5 on the index. And that was only the beginning of lock down! This months’ reading is expected to dive deeper into contraction territory to 29.

Over the last 4 weeks, a cumulative total of more than 22m claims have been made, which is around the number of jobs that were created in the decade of expansion. So it’s no exaggeration to call the scale of the declines unprecedented.

Two highlights today

- & Flash PMIs (Apr):Services & composite set to print fresh record lows, watch supplier deliveries impact on manufacturing

- Initial Jobless Claims (Apr 18): Pace of claims set to slow slightly, but still elevated, exp. 4.15mln

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