UK borrowing hits five-year August high as spending outpaces receipts

UK government borrowing rose to £18 billion in August, the highest for the month in five years, the Office for National Statistics said on Wednesday. Borrowing—the difference between public spending and tax income—was up £3.5 billion from August last year and came in above economists' expectations. The ONS said that while tax and National Insurance receipts increased, spending on public services, benefits and debt interest grew at a faster pace.

Borrowing in the first five months of the financial year totaled £83.8 billion, up £16.2 billion from the same period a year earlier. The August outturn adds to a trend of rising deficits as the government grapples with higher debt-service costs and persistent spending pressures.

The Office for Budget Responsibility had forecast August borrowing of £12.5 billion, and City economists were looking for roughly £12.8 billion. Paul Dales, chief UK economist at Capital Economics, said the figures 'highlight the deteriorating nature of the public finances even though the economy hasn't been terribly weak' and that the data would likely push the chancellor to find money in November's Budget, mostly through higher taxes.

Analysts noted the August outturn underscores the challenge of restoring balance to the public finances while the economy sustains only modest growth and inflation has cooled. The numbers come ahead of the government's next fiscal decisions, with markets watching for signals on tax policy and borrowing costs.

With official data due to be updated again in the coming months, the ONS will provide a fuller picture of debt dynamics, including how much of the gap is driven by debt interest and benefit outlays versus tax receipts.