UK August Borrowing Rises to £18.3 Billion as Debt-Interest Costs Climb

The UK public sector borrowed £18.3 billion in August 2026, £2.9 billion more than a year earlier, as higher government spending outweighed stronger tax receipts. The monthly total was £3.5 billion above the Office for Budget Responsibility’s March forecast profile and was the second-highest August borrowing figure on record, behind the pandemic-era total in August 2020.

The monthly increase does not mean borrowing has risen across the financial year as a whole. From April through August, public sector borrowing totaled £77.3 billion, £2.2 billion less than in the same five months of 2025. It was still £8.1 billion above the OBR’s forecast profile for the period, leaving the public finances running ahead of the path assumed in March.

The Office for National Statistics’ August public-finance release showed a current budget deficit of £12.4 billion for the month. That brought the April-to-August current budget deficit to £51.9 billion, down £2.9 billion from a year earlier but £4.8 billion above the OBR profile.

Spending growth outpaces stronger receipts

Central government current receipts reached £89.8 billion in August, up £3.3 billion, or 3.8%, from a year earlier. Total central government tax receipts rose by £2.5 billion to £66.3 billion. Income-related taxes contributed much of that increase, rising £1.5 billion to £24.6 billion, while Corporation Tax receipts increased by £0.4 billion to £8.6 billion.

Spending rose somewhat faster. Central government current expenditure was £93.9 billion, £3.8 billion above August 2025, while total expenditure including net investment reached £103.1 billion, an increase of £4.9 billion. Spending on goods and services rose £2.2 billion to £39.8 billion and net social benefit payments increased £1.9 billion to £29.2 billion.

Debt interest added another source of pressure. Central government interest payable was £8.8 billion in August, up £0.4 billion from a year earlier and the highest August figure since monthly records began in 1997, without adjusting for inflation. It was, however, lower than in each of the first three months of the current financial year, illustrating how volatile the monthly interest bill can be.

Index-linked gilts account for part of the month-to-month swing. The interest recorded on those securities moves with the Retail Prices Index. Of August’s £8.8 billion interest bill, £2.1 billion reflected the capital uplift on index-linked gilts, largely tied to the 0.3% increase in the RPI between May and June. The uplift accrues over the life of the gilt even though it is paid to investors when the security is redeemed.

August’s subsector figures show central government borrowed £13.3 billion, £1.6 billion more than a year earlier. Local government borrowing was estimated at £4.5 billion, up from £3.0 billion, while the public-corporation sector contributed a smaller amount. The ONS cautions that some of the most recent subsector estimates remain provisional and can change as fuller information becomes available.

Year-to-date borrowing stays below last year but above forecast

The five-month picture is more mixed than the August headline. Central government current receipts were £460.7 billion from April through August, £23.6 billion higher than a year earlier. Income-related taxes increased by £8.1 billion, Corporation Tax by £4.2 billion and VAT by £3.8 billion over the same period.

Over the same five months, total central government expenditure reached £546.3 billion, £25.6 billion higher than a year earlier. Net social benefits increased £9.7 billion to £145.0 billion, spending on goods and services rose £7.1 billion to £196.2 billion, and net investment increased £4.2 billion to £41.1 billion. Debt interest was £50.0 billion, only £0.7 billion higher than a year earlier, so the year-to-date spending increase has not been driven by interest costs alone.

Through August, the ONS borrowing estimate of £77.3 billion was £8.1 billion above the OBR profile of £69.2 billion. The OBR’s March 2026 Economic and fiscal outlook forecast public sector net borrowing of £115.5 billion for the full 2026-27 financial year. Monthly profiles are not a new full-year forecast, and the ONS notes that year-to-date comparisons are generally more reliable than judging performance from a single volatile month.

The August release also revised earlier figures. The estimate of borrowing through July was raised by £2.3 billion, from £56.7 billion to £59.0 billion, largely because previous central government tax receipts were revised lower. The estimate for the financial year ending March 2026 was increased by £4.5 billion to £134.3 billion. Those changes underline why early monthly borrowing figures should be treated as provisional rather than fixed outturns.

Debt remains close to £3 trillion ahead of the October forecast

Public sector net debt was provisionally estimated at £2,985.5 billion at the end of August, £78.5 billion more than a year earlier. As a share of the economy, though, debt was estimated at 93.8% of GDP, 1.3 percentage points lower than a year earlier. The level remains around ratios last seen in the early 1960s.

A broader balance-sheet measure, public sector net financial liabilities, stood at £2,620.4 billion, or 82.3% of GDP. That ratio was 0.2 percentage points higher than a year earlier. The distinction matters because net financial liabilities include a wider range of financial assets and liabilities than the headline net-debt measure.

The next major official reassessment comes on 28 October, when the OBR is scheduled to publish a new Economic and fiscal outlook alongside the UK Budget. That forecast will replace the March assumptions now used as the benchmark for the monthly borrowing comparisons and provide a fresh view of borrowing, debt and debt-interest costs for the remainder of the financial year.