UK Borrowing Hits £77.3bn, Exceeds Forecast by £8.1bn
UK Borrowing Hits £77.3bn, Exceeds Forecast by £8.1bn
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Key Points
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Total public-sector spending rose by £6.7 billion year on year in August to £117.2 billion, while revenue increased by £3.7 billion to £99 billion. Central-government spending climbed by £4.9 billion, driven by higher goods-and-services spending and social benefits.
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The current budget deficit, which excludes investment spending, reached about £51.9 billion in the first five months of the financial year, compared with the OBR forecast of £47.1 billion.
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The government’s 10-year borrowing costs recently rose to their highest level in 19 years, reflecting increased investor concern about the sustainability of public borrowing.
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The government’s fiscal rule requires the current budget, excluding investment spending, to return to surplus by the end of the parliament; higher gilt yields have reduced the headroom available to meet that rule.
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Richard Tice said the Office for National Statistics had raised its borrowing estimates for every month of the 2025-26 financial year since July, adding £2.3 billion to the overall estimate.
UK public borrowing jumped to £77.3 billion in the first five months of the financial year, smashing official forecasts by £8.1 billion GuruFocus. In August alone, borrowing hit £18.3 billion—more than £2.5 billion above expectations—as spending surged faster than government revenue QNA. The overrun puts pressure on Chancellor John Healey ahead of the October 28 budget, with borrowing costs rising to their highest level in 19 years.
Spending Climbs Faster Than Revenue Growth
Total public spending in August reached £117.2 billion, up £6.7 billion year on year. Government revenue grew just £3.7 billion to £99 billion, creating a widening gap between money in and money out VT Markets. Central government spending jumped £4.9 billion, driven by higher social benefits and goods-and-services costs Market Screener.
Current Budget Deficit Blows Past Forecasts
The current budget deficit—which excludes investment spending—reached £51.9 billion from April through August. The Office for Budget Responsibility predicted £47.1 billion, meaning actual borrowing overran forecasts by nearly £5 billion GuruFocus. This metric matters because the government's fiscal rule requires the current budget to return to surplus by the end of parliament.
Borrowing Costs Hit 19-Year High
The government's 10-year borrowing costs recently rose to their highest level since 2005, signaling investor worry about whether the UK can sustain its debt load GuruFocus. Higher gilt yields squeeze fiscal headroom—the wiggle room to meet budget targets. As interest costs climb, the government has fewer pounds left for tax cuts or spending increases without breaking its own rules.
Estimates Keep Rising, Adding More Pressure
The Office for National Statistics has raised its borrowing estimates for every month of the 2025-26 financial year since July, adding £2.3 billion to the annual forecast GuruFocus. Public-sector net debt stands at roughly 93.8% of GDP—historically high. The repeated upward revisions suggest the fiscal picture may worsen further before the October budget, leaving Healey with fewer options: either raise taxes, cut spending, or allow borrowing to grow.
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