UK borrowing hits £23.3bn in May amid Iran war economic impact
13 reported
The UK borrowed £23.3bn in May, exceeding forecasts, as the economic effects of the Iran war pushed up debt interest costs, according to the Office for National Statistics. The figure was the second highest for any May on record and £5.6bn above the forecast from Chancellor Rachel Reeves’s spring statement. City economists had expected borrowing of £18.5bn. The ONS reported that borrowing for the first two months of the financial year reached £46.3bn, £8.9bn higher than the same period in 2025. The data was released shortly after Andy Burnham’s victory in the Makerfield byelection, with Burnham expected to challenge Keir Starmer for the Labour leadership. The ONS attributed the overshoot to higher-than-expected inflation, which increased public service costs and interest payments on inflation-linked bonds. Debt interest payments in May were £11.7bn, up £4.1bn from a year ago, while tax revenues rose 4.1% to £85.5bn.
What’s reported
UK public sector net borrowing in May was £23.3bn, the second highest for any May on record.
Borrowing was £5.6bn above the spring statement forecast and £4.8bn above the £18.5bn expected by City economists.
Borrowing for April and May combined was £46.3bn, £8.9bn higher than the same period in 2025.
Debt interest payments in May were £11.7bn, up £4.1bn from a year ago.
Tax revenues in May were £85.5bn, up 4.1% from a year ago.
Government debt stood at 95.1% of GDP, 0.7 percentage points above the OBR spring forecast.
The Bank of England kept interest rates at 3.75% on June 19, 2026.
Inflation remained at 2.8% last month, above the Bank’s 2% target, due to rising fuel prices from the Middle East war.
Andy Burnham won the Makerfield byelection and is expected to challenge Keir Starmer for the Labour leadership.
If Burnham becomes leader, he is expected to appoint a new chancellor; Ed Miliband and Shabana Mahmood have been mentioned as potential replacements for Rachel Reeves.
The defence investment plan prompted the resignation of Defence Secretary John Healey last week.
Chancellor Rachel Reeves called the conflict a “folly.”
Chief Secretary to the Treasury Lucy Rigby said the war in the Middle East had impacted economies worldwide.
Key figures
Andy Burnham, Labour MP, winner of Makerfield byelection, expected to challenge for Labour leadership
Keir Starmer, Labour leader
Rachel Reeves, Chancellor of the Exchequer
Tom Davies, senior statistician at the ONS
Martin Beck, chief economist at WPI Strategy
Lucy Rigby, Chief Secretary to the Treasury
Ed Miliband, Energy Secretary
Shabana Mahmood, Home Secretary
John Healey, former Defence Secretary (resigned last week)
Sources: The Guardian
