Borrowing in April hit highest level since Covid

UK borrowing past period deed the highest full for April since the Covid pandemic successful 2020, highlighting the challenges facing the government.

Public assemblage borrowing, the quality betwixt spending and income from taxes, was £24.3bn past month, authoritative figures showed, which was up £4.9bn from a twelvemonth earlier and higher than expected.

Separate information showed retail income volumes fell successful April by the fastest gait for astir a year, aft the leap successful petrol prices deed request for fuel.

The latest figures "highlight the deteriorating maturation outlook and fragile fiscal backdrop that volition look whoever is successful 10 Downing Street", said Ruth Gregory, lawman main UK economist astatine Capital Economics.

Office for National Statistics (ONS) main economist Grant Fitzner said April's borrowing fig was "substantially higher" than a twelvemonth earlier, with higher taxation receipts being "more than offset by higher spending connected benefits and different costs".

Spending connected benefits roseate by £2.7bn, which the ONS said was mostly caused by inflation-linked increases to galore benefits and the earnings-linked emergence to the authorities pension.

Debt involvement payments deed a grounds precocious for the period of April of £10.3bn, up £0.9bn from a twelvemonth earlier.

The surge successful vigor prices since the opening of the Iran warfare has prompted analysts to chopped their maturation predictions for the UK economy, with households facing higher substance bills and the Bank of England nary longer expected to chopped involvement rates.

Weaker economical maturation is apt to pb to a slower summation successful wide revenues from taxes, though the authorities mightiness summation other income from taxes connected petrol and North Sea lipid and gas.

Borrowing costs - arsenic indicated by yields connected authorities bonds, oregon gilts - person risen since the opening of the conflict, with fiscal markets indicating that they deliberation the Bank mightiness person to rise rates to rein successful inflation.

While borrowing costs person risen for astir each governments since the Iran warfare began, the uncertainty surrounding the enactment of the Labour enactment has led to the UK facing a larger increase.

"We estimation that indebtedness involvement costs successful 2026/27 volition beryllium astir £15bn higher than assumed successful the Budget if gilt yields clasp astatine existent levels for the remainder of the year," said Rob Wood, main UK economist astatine Pantheon Macroeconomics.

He added that "political risk" had added to the UK's borrowing costs, and helium expects them to stay "more elevated than they different would beryllium this year".

The authorities is besides spending connected measures to effort to antagonistic the emergence successful the outgo of living.

On Thursday, it announced a cut successful VAT connected tickets for household days out, escaped autobus journeys for under-16s successful England successful August and cuts to import taxes connected immoderate basal foods. To assistance money this the authorities is changing the taxation rules for immoderate UK-based lipid and state companies.

Dennis Tatarkov, elder economist astatine KPMG UK, said the little maturation forecasts for the UK meant that "public assemblage borrowing is apt to stay elevated successful the mean term, perchance forcing the chancellor's manus to marque much tweaks to fiscal argumentation astatine the clip of the autumn Budget".

The Chief Secretary to the Treasury, Lucy Rigby, said the authorities was "cutting borrowing and indebtedness – with our actions reducing authorities borrowing by implicit £20 cardinal past year".

"Working families person benefited from falls successful ostentation and cuts to involvement rates - and our non-negotiable fiscal rules volition beryllium each the much important to proceed to support them arsenic we look the consequences of the warfare that we person played nary portion in," she added.

Shadow chancellor Mel Stride highlighted however "debt involvement spending was the highest of immoderate April connected record".

"The caller spike successful borrowing costs shows markets are progressively disquieted astir Keir Starmer's replacement," helium added.

The retail income information from the ONS showed that volumes fell by 1.3% successful April. That was the biggest monthly autumn since May 2025 and reversed a 0.6% emergence successful the erstwhile month.

The diminution was led by a 10.2% autumn successful centrifugal substance sales, the largest monthly autumn since November 2020.

The ONS said the diminution suggested that "motorists were conserving substance aft stocking up successful March".

Clothing stores besides saw income autumn during the month, which was partially blamed connected "variable upwind conditions".