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Bank of England: UK capital issuance rises to £20.9bn in December

Total gross capital issuance by all UK residents came in at £31.2bn ($41.7bn) in December, £20.9bn lower than in November, and £11.1bn lower than the previous six-month average, according to latest figures from the Bank of England (BoE).

Total net capital issuance was -£1.1bn last month, compared with £15.8bn a month prior, and the previous six-month average of £3.9bn.

The capital issuance statistics published on Friday consist of non-government primary market issuance of bonds, commercial paper and equity, representing finance raised by UK resident entities.

The data also showed that gross bond issuance was £17.4bn in December, down from £28.5bn the month before, while gross commercial paper issuance was £11.9bn.

Total capital issuance was £505.2bn in 2021, compared to £527.7bn in 2020.

Total capital issuance by UK residents. Chart: Bank of England
Total capital issuance by UK residents. Chart: Bank of England

The fall in total annual issuance was primarily driven by a decrease in private non-financial corporations (PNFC) issuance. The sector issued £81.1bn in 2021, compared to £138.8bn in 2020, and the previous four-year average of £114.8bn.

The figures from the BoE come just days before it is set to decide on UK interest rates. Threadneedle Street is widely expected to raise rates by a further 25bp at next week’s February meeting.

Economists expect rates to rise around three more times this year after the Bank put rates up in December from 0.1% to 0.25% to tackle rising inflation.

Laith Khalaf, head of investment analysis at AJ Bell, says: “A rate rise at the Bank’s February meeting is all but inked in, which if realised would be the first time since 2004 that the bank has raised interest rates in two consecutive meetings.

“Market pricing suggests a further three hikes this year, taking base rate to 1.25% by the end of 2022, which would be its highest level since February 2009, just before an ‘emergency’ rate of 0.5% and QE were introduced.”

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