UK Public Borrowing Lower Than Expected

UK public sector net borrowing (excluding public sector banks) recorded £16.0 billion in June 2026, a third lower than £23.9 billion in the same month last year and below market expectations of £19.8 billion. In the financial year through June 2026, public sector net borrowing stood at £57.6 billion, £3.7 billion lower than in the same period last year but £2.7 billion above the OBR’s March forecast, marking the tenth-highest April-to-June borrowing since comparable records began in 1993. Central government receipts rose to £95.0 billion, up £5.2 billion from a year earlier, supported by strong growth in income-related taxes and Value Added Tax receipts. Meanwhile, central government expenditure eased to £111.4 billion from £112.9 billion, largely reflecting a £5.3 billion decline in debt interest payments to £11.8 billion, although they remained the fourth-highest June on record. Public debt remained close to 95% of GDP, near its highest level since the early 1960s.

UK public sector net borrowing (excluding public sector banks) rose to £23.3 billion in May 2026 from £17.9 billion last year, above market expectations of £18.5 billion. This was the second-highest borrowing for any May on record, behind that of 2020, indicating a tight fiscal situation. Public sector spending increased by £9.1 billion year-on-year to £118.0 billion, driven by rising costs of debt interest payments, public service delivery, investment, and benefits. Central government debt interest costs were the highest ever recorded for the month of May. Public sector receipts rose by £3.7 billion to £94.8 billion, supported by higher tax receipts. Public sector net debt excluding public sector banks was equivalent to 95.1% of GDP at the end of May, up 0.4 ppts from a year ago. Borrowing in the FY to May was £46.3 billion, up £8.9 billion from the same period in 2025 and £7.7 billion more than the OBR’s forecast in March before the full impact of the Middle East war were known.

UK public sector net borrowing (excluding public sector banks) widened to £24.3 billion in April 2026 from £19.5 billion a year earlier, above market expectations of £20.9 billion. It was the second-highest April borrowing on record, underlining pressure on the public finances. The reading contrasts with March forecasts that borrowing would fall to 3.6% of GDP in the 2026/27 tax year, its lowest level since before the COVID-19 era. However, the war involving Iran has increased the risk of an economic slowdown, threatening tax revenues while adding pressure on Chancellor Rachel Reeves to support households and businesses facing higher energy costs. Public sector spending rose by £7.6 billion, driven by higher welfare costs, increased investment, public service spending, and record April debt interest payments. Meanwhile, public sector receipts increased by £2.7 billion. Public sector net debt stood at 94.2% of GDP at the end of April, up 0.5 percentage points from a year earlier.