Public borrowing soars to fresh highs
By Abigail Townsend
Date: Friday 19 Sep 2025
(Sharecast News) - Public sector borrowing surged by a worse-than-expected £18bn in August, official data released on Friday showed.
According to the Office for National Statistics, the government borrowed £18bn in August, as surging levels of spending and higher borrowing costs outstripped an increase in tax and National Insurance receipts, to £84.3bn.
Up £3.5bn on the same month a year previously, it was the highest August borrowing for five years.
The Office for Budget Responsibility had forecast the government would borrow £12.5bn in the month.
As a result, borrowing in the current financial year has now reached £83.8bn, up £16.2bn on the same period a year earlier.
It was the second highest April-to-August borrowing after the start of the pandemic, and also ahead of OBR forecasts.
The fiscal watchdog had expected borrowing to hit £72.4bn by this point in the year.
The data will make for hard reading for chancellor Rachel Reeves, who is battling sluggish economic growth and sticky inflation alongside higher borrowing costs, vast government spending and mounting debt.
Matt Swannell, chief economic advisor to the EY Item Club, said: "As the Budget approaches, this leaves the UK finances in a fragile position.
"The government has pledged to only borrow to invest by 2029/30, and while the latest data shows it may be starting from a more difficult position than expected the spring statement, greater fiscal challenges loom.
"The combination of gilt market stress and reversals on welfare reform has used up the thin margin for error in the Government's current spending plans, meaning taxes will almost certainly need to rise if fiscal rules are to be met."
Rabobank said: "Yields on longer-dated gilts are opening significantly higher, with sterling down against both dollar and euro, reflecting concerns about the sustainability of the UK's finances.
"In short, tax hikes are pretty much unavoidable. That will be a tough message to sell, as Labour is already trailing Reform in the polls. But investors require something tangible than just rhetoric: they demand to see credible and substantial fiscal adjustments."
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