UK public borrowing rises more than forecast

Public sector net borrowing (excluding public sector banks) in the UK widened sharply to £20.7 billion in June 2025, up from £14.1 billion in the same month a year earlier, and well above market expectations of £15.6 billion.

his marked the highest level of June borrowing since April 2021 and underscores the mounting fiscal pressures facing the UK government amid a challenging macroeconomic environment. The sharp rise was largely driven by persistently high inflation, which continued to inflate the cost of servicing index-linked debt.

Total public sector spending surged by £12.7 billion compared to June 2024, with a substantial £8.4 billion of that increase attributed to higher interest payments on government debt. Elevated inflation, particularly in earlier months of the year, continued to feed through into interest costs on inflation-linked gilts, compounding the Treasury’s financial burden. Spending on welfare and public services also rose modestly, reflecting ongoing cost-of-living support measures and increased public sector wage settlements.

On the revenue side, total receipts climbed by £6.1 billion year-over-year. This was supported by a £2.3 billion increase in central government tax receipts—driven mainly by income tax and VAT—and a further £3.1 billion rise in compulsory social contributions, likely tied to a resilient labor market and wage growth.

Borrowing for the financial year to date (April through June) reached £57.8 billion, up £7.5 billion from the same period in 2024. This made it the third-highest April–June borrowing on record, surpassed only by the extraordinary borrowing levels seen during the pandemic years of 2020 and 2021.

The data highlights the continued challenge of bringing the UK’s public finances under control while managing economic headwinds, including inflation, weak growth, and political pressures to maintain public spending.

Public sector net debt excluding public sector banks was estimated at 96.3% of GDP at the end of June, remaining near multi-decade highs. While debt as a share of GDP has stabilized somewhat, it remains a key area of concern for policymakers and rating agencies, particularly given ongoing fiscal risks such as rising healthcare and pension costs, uncertain tax revenues, and the potential impact of global economic slowdowns.

Looking ahead, the government faces increasing pressure to balance fiscal discipline with public investment, particularly as the general election cycle looms and calls grow for tax cuts or increased social spending. The data may also influence the Bank of England’s monetary policy stance, as high borrowing and inflation-linked payments complicate the broader economic outlook.