UK government borrowing comes in above £20bn for second consecutive month

Emeritus Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.

Public sector net borrowing came in at £23.3 billion in May, showing the continuing pressure on the UK’s public finances and the difficult choices that lie ahead for the government and the Treasury for the rest of this financial year.

Borrowing in May was only slightly below the exceptionally high level recorded for April, remaining very high by historical standards. The latest data once more highlight the difficulty of balancing public-sector spending requirements with the government’s pledge to keep public finances on a sustainable path.

A number of factors continue to weigh heavily on the fiscal position. Debt interest payments remain elevated, public services are under significant strain, and weaker economic growth risks limiting the pace of tax revenue growth into the Treasury coffers. At the same time, seemingly unending demands for more and more spending, particularly on health, defence and infrastructure, show little sign of easing up.

The implications reach far beyond just the monthly borrowing numbers themselves. The figures will shape expectations about the Chancellor’s room for manoeuvre ahead of the Autumn Budget and will influence decisions on taxation, public spending and borrowing for the remainder of the financial year. The UK is far removed from the extraordinary borrowing levels seen during the pandemic, but the public finances are not in comfortable territory.

The challenge now is to create the conditions for sustainable economic expansion while restoring greater resilience to the public finances. How successfully the government manages that difficult balancing act will have important consequences for businesses, households and investors alike.