UK August borrowing hits £18.3 billion as debt interest costs reach record high

August borrowing exceeds official forecasts

UK public sector net borrowing reached £18.3 billion in August, surpassing forecasts produced by the Office for Budget Responsibility by £3.5 billion. Figures released by the Office for National Statistics show that monthly borrowing rose by £2.9 billion, an increase of 19% compared to August 2025. The monthly shortfall represents the second-highest August borrowing total on record, surpassed only by August 2020 during the pandemic response. The statistical agency reported that the deficit widened because government spending grew faster than tax receipts and other public revenue. State expenditures were driven upward by inflation-related costs, statutory increases to the state pension, and expanded spending across other welfare benefits.

Record debt interest and inflation pressures

Central government debt servicing costs totaled £8.8 billion in August, marking the highest monthly interest figure for any August since records began. This increase stemmed partly from elevated inflation, which pushed up payments due on index-linked gilts tied to the Retail Prices Index. Higher debt yields followed an energy shock in the Middle East that pushed government borrowing costs to multiyear highs. At the same time, headline UK inflation climbed to a five-month peak in August, driven primarily by higher retail prices for petrol and diesel fuel.

Treasury Chief Secretary Emma Reynolds stated that economic expansion requires strict control over government outlays.

Britain has huge potential to deliver good growth in every postcode, creating jobs, raising living standards and investing in the services people rely on.

But we can only deliver that growth with fiscal discipline.

Reynolds added that the government must maintain safeguards while addressing public obligations.

At a time when debt interest costs billions of pounds that could otherwise be spent on improving lives, we must always know where the money is coming from to pay for public services.

That is why we are committed to meeting our fiscal rules with a buffer against uncertainty, taking the tough decisions needed to keep the public finances on a sustainable path.

Eight-month deficit and total national debt

Cumulative public sector borrowing for the first eight months of the year reached £77.3 billion. Although this total was £2.2 billion lower than the borrowing recorded over the same period in 2025, it exceeded official estimates by £8.1 billion. The cumulative deficit over these eight months was equivalent to 2.5% of gross domestic product, down by 0.2 percentage points compared to the previous year. Total UK public sector net debt climbed to £2,985.5 billion, representing a year-on-year increase of £78.5 billion. Measured as a share of the economy, total net debt stood at 93.8% of GDP, which is 1.3 percentage points below the ratio recorded twelve months earlier.

Fiscal rules and the upcoming autumn Budget

The borrowing overshoot reduces the fiscal margin available to Chancellor John Healey as he prepares his first autumn Budget, scheduled for delivery on 28 October. The government led by Prime Minister Andy Burnham operates under a fiscal rule requiring the current budget, which excludes capital investment spending, to achieve a surplus by the conclusion of the parliament. Economists cited by the Financial Times estimate that elevated gilt yields have significantly narrowed Healey's remaining headroom against this fiscal constraint. In response to these fiscal pressures, the chancellor has begun preparing the public for strict fiscal measures in the October fiscal statement.