U.K. Economic Data ‘Very Positive,’ Top Treasury Official Says

Recent data on the U.K. economy have been “very, very positive” and fewer companies may default on loans than currently estimated, according to the top civil servant at the Treasury.

Tom Scholar said an estimate that around 26 billion pounds ($37 billion) of state-backed loans made to companies may have to be written off now seems “a bit backward looking” given the strength of the recovery.

“I’m not sure precisely on what date it was assessed, but with each month that goes by, we’re getting economic data that is stronger than was expected,” he told the lawmakers on the Public Accounts Committee. “And to the extent that the vaccination program in particular, but other measures too, are successful in helping the economy get back quickly to something more like normality, then you would expect a higher proportion of those businesses to thrive and prosper and be in a position to repay their loans.”

The loan-loss estimate was published by the Office for Budget Responsibility in March, when it predicted the economy would grow by 4% this year. However, private-sector economists are now predicting an expansion of about 6%. That would provide a boost to the pandemic-battered public finances.

Scholar said there was evidence that many companies took out loans as a “precautionary measure” but never ended up spending the money.

He also said a National Audit Office assessment that government Covid-related spending now amounts to 372 billion pounds was a “reliable snapshot” as of today but is almost certain to change. What’s hard to predict are “demand-driven” costs such as future vaccination and virus testing programs and the extent of loan defaults, he said.

“We’ll only have a definitive view once we are clearly the other side of the pandemic,” he said.

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