Given the overwhelmingly downbeat consensus narrative that dominates UK economic commentary, I wanted to bring a bit of cheer to the UK Bank Holiday weekend.

This week, once again, the media is full of depressing articles about the state of the economy, public finances and the likelihood of further tax increases later in the year. In particular, April’s public borrowing number created a chorus of woe that fed this bearish mood. The Guardian, for example, highlighted that this April figure was higher than economists had forecast and was the fourth-highest April figure on record. Combined with Keir Starmer’s decision to reinstate winter fuel payments at least for some pensioners, this naturally led to talk of tax increases later in the year.

As is so often the case, this consensus commentary missed some key data that the ONS helpfully presented in its April statistical bulletin, which presents a somewhat different picture. Right at the start of this report, under the heading, Main Points, the ONS reports the following:

1. Borrowing in the financial year ending March 2025 was provisionally estimated at £148.3bn, £3.7bn lower than the ONS’s initial estimate published in April this year.
2. The current budget deficit, borrowing to fund day-to-day spending, which excludes government investment spending, in the year to March 2025, was £70.3bn, £4.3bn lower than the ONS’s estimate in April.
3. The April borrowing figure, which so horrified the financial media, was especially interesting. The current budget deficit in April 2025 (the measure that excludes government investment spending) was £13.9bn, £400mn lower than in April last year.
4. Government net investment was £6.2bn, £1.4bn more than in the same month in 2024.

In fact, what the Guardian and all the other horrified economists should have written is that the UK government is investing more in the UK economy than they had anticipated. In other words, it's a good thing, not the out-of-control current spending this number was characterised as.

Another thing to point out about the total borrowing number is that the ONS estimated it to be £3.7bn less than it forecast as recently as April. This undershoot probably prompted the PM to reverse engines on winter fuel payments, a change that will likely cost less than £1bn.

One last interesting data point that backs up my more upbeat perspective on the UK economy is today’s consumer spending numbers. Once again, they have come in well ahead of consensus expectations. Instead of the anticipated 0.1% increase, the key measure was up 1.3% in April, when, according to the MPC, we were all terribly discombobulated by Trump’s tariff announcement. Well, apparently, not!

Bloomberg has described UK retail sales as “soaring” and reminds its readers that this is the fourth month in a row when retail sales have exceeded economists’ expectations. Clearly, the extremely good weather we have been enjoying in the UK may have played a part, but this was not a secret, and consensus economists presumably knew it had been sunny, too. Bloomberg goes on to highlight that despite rising household bills, the global tariff wars and tax hikes, in the three months to April, retail sales were up 2.8% on the same period in 2024, the fastest increase since 2022.

In summary, these latest data are encouraging and give me added confidence that my non-consensual view that the economy will grow well this year and accelerate next year is correct. So far, so good!

P.S.

It appears that the majority of wage settlements in the UK in the key month of April have settled in the 3-4% range. This is close to a Goldilocks outcome in that the number means those workers will see real wage increases this year, but it is low enough to settle the nerves of those members of the MPC who are most concerned about UK inflation. Consequently, I still expect at least two further rate cuts this year in August and November.  

Finally, Ofgem has confirmed that energy bills will fall in July by £129, or 7% for the average household. This is slightly less than I had hoped, but it is nevertheless unequivocally good news for future inflation data and, of course, for the consumers.

Are you not cheered up?