Managing public debt in the UK

The Covid-19 pandemic that emerged in early 2020 quickly turned into an economic crisis of unprecedented proportions. The UK, one of the worst affected countries, suffered a 9.9 percent drop in output in 2020, the deepest recession in 300 years.¹ The required public health expenditure in the fight against the coronavirus and the ballooning cost of support programs to both households and businesses led to a sharp rise in government spending.² When combined with the significant drop in tax revenues following the contraction in economic activity, the surge in spending pushed the debt burden to levels previously unseen in peace times.

This article assesses the evolution of government debt in the UK both in the recent past as well as over the last century to put the current escalation in indebtedness into context. We then present the sources of debt consolidation both in general and in the UK context.

Finally, we provide an evaluation of likely scenarios for debt management in the UK in its transitioning to a post-Covid-19 world.