UK Government Borrowing Falls by £19.8 Billion to £132 Billion in March

UK government borrowing saw a reduction of GBP#19.8 billion in the year leading up to March, settling at GBP#132 billion. The Office for National Statistics (ONS) confirmed this figure, which represents the difference between public spending and tax income.

This total undershot the GBP#132.7 billion projection from the Office for Budget Responsibility (OBR), the government's independent fiscal watchdog.

Economic Outlook and War Impact

Despite the recent decline, analysts are warning that borrowing could climb in the coming year, primarily due to the ongoing economic repercussions of the Iran war. Ruth Gregory, Deputy Chief UK Economist at Capital Economics, stated that she does “not expect this improvement to last long,” emphasising that the full impact of energy price shocks from the conflict “is still to come.”

Gregory further elaborated, suggesting that a combination of targeted energy price support, estimated at approximately GBP#20 billion, high interest rates, and a weakening economy will likely see borrowing rise from GBP#132 billion in 2025/26 to around GBP#145 billion this year.

For March alone, ONS data indicated borrowing stood at GBP#12.6 billion, surpassing analyst expectations. Nevertheless, this figure marked a GBP#1.4 billion decrease compared to the previous year and was the lowest March borrowing recorded since 2022.

The ONS reported that borrowing as a proportion of GDP for the year to March was 4.3%, the lowest since the 2019-20 period, immediately preceding the COVID-19 pandemic. Tom Davis, an ONS senior statistician, noted that “although spending has risen this financial year, this was more than offset by increased receipts.”

James Murray, Chief Secretary to the Treasury, commented, “Our deficit is down GBP#19.8 billion because of our plan to cut borrowing. In a volatile world the decisions we are taking are the right ones to keep costs down, take back our energy security and cut borrowing and debt.”