Only one EU nation surpasses Britain’s accelerated post-Covid debt accumulation

Official data reveals that Britain’s debt pile has expanded at an accelerated rate compared to most EU countries, with the exception of France, since the onset of the pandemic. The Office for National Statistics reports that the UK government debt has risen from 85.5% of the gross domestic product (GDP) in the last quarter of 2019 to 100.5% in the first quarter of this year. This indicates a substantial increase of 15 percentage points. In comparison, the EU’s average debt burden increased by only 6.2 percentage points, from 77.5% to 83.7% of GDP, over the same period. The UK’s growth in debt is second only to France, which experienced the same increase in debt-to-GDP ratio post-Covid. However, France’s overall burden was significantly higher, at 112.4% of GDP earlier this year.

A combination of excessive government borrowing during the pandemic, sluggish economic growth in the UK, and rising borrowing costs have led to the widening gap between Britain and the EU. At the end of 2019, the UK’s debt burden as a percentage of GDP was eight points higher than the EU’s. Now, this gap has widened to 16.8 percentage points.

PwC’s chief economist, Barret Kupelian, points out that the major difference for the UK lies in its lack of economic growth, which serves as the denominator for the debt-to-GDP ratio. In the first quarter of this year, UK GDP was still 0.5% below its level at the end of 2019, while the eurozone experienced a 2.7% increase. Kupelian attributes the sluggish growth in the UK to the aftermath of the financial crisis. Since then, productivity growth and business investment in the UK have stagnated. Furthermore, the UK has seen a persistent decline in labor participation since the pandemic, setting it apart from Europe.