Official data shows the UK government borrowed more than expected in the first half of the year, pushing national debt above £3 trillion ($4 trillion) for the first time—highlighting the challenges facing Chancellor John Heilely ahead of his upcoming budget next week.
The Office for National Statistics reported that the fiscal deficit widened to £97.8 billion between April and September, £6 billion higher than the Budget Responsibility Office’s forecast in March. Borrowing alone in September reached £24.5 billion, exceeding both OBR projections and the deficit recorded at the same time last year.
The chancellor aims to strike a balance: providing households and businesses with “breathing space” amid rising costs driven by the war in Iran, while reassuring bond markets of his commitment to controlling borrowing.
“We know that conflicts in the Middle East and Europe are driving up prices, affecting the UK and countries around the world,” Heilely said in a written statement. He pledged to “maintain fiscal discipline, support economic growth across all regions, and provide some relief for families and businesses.”
However, the International Monetary Fund (IMF) last week praised the UK as the G7 country making the greatest effort to rein in borrowing.
In its World Economic Outlook, the IMF projected that the UK’s budget deficit would fall from about 3.8% of GDP this year to 1.4% by 2031—the largest reduction among all advanced industrial economies. While attending an IMF meeting in Bangkok, Heilely reaffirmed his commitment to sticking with the established plan to reduce the deficit. The OBR will update its forecasts alongside the budget.
After growing sharply over the past six years, total UK debt has now surpassed £3 trillion. It first crossed the £2 trillion threshold in June 2020 during the pandemic. Currently, UK debt stands at 94% of GDP—the highest level since the 1960s—with annual debt servicing costs exceeding £110 billion.
So far this year, tax revenues have exceeded expectations, and the economy has shown resilience against energy shocks triggered by Middle Eastern conflicts. However, worsening fiscal conditions reflect accelerating government spending and inflation, which has increased the cost of goods and services, welfare payments, and interest on debt. Despite a downward revision of £4 billion in borrowing forecasts for the first five months of the 2026–27 financial year, overspending on borrowing remains.
