UK posts £1.8bn July deficit as spending rises
This digest was compiled by AI from multiple sources — links to the originals are below.
Britain's government recorded an unexpected £1.8 billion budget deficit in July, the Office for National Statistics said on Aug 21. Higher social benefits spending of £2 billion offset record self-assessed income tax receipts. Borrowing in the first four months of 2026/27 reached £56.7 billion, £2.3 billion above the Office for Budget Responsibility forecast.
Key Facts
- Public sector net borrowing was £1.8 billion in July, against a Reuters poll forecast for a balanced budget.
- Central government spending on social benefits rose £2 billion in July from a year earlier.
- Borrowing in the first four months of 2026/27 totalled £56.7 billion, £2.3 billion above the OBR forecast.
- The current budget deficit stood at £34.7 billion over April-July, below the OBR projection of £36.7 billion.
- The ONS revised down borrowing estimates for May and June by a combined £7.5 billion.
July Deficit Details
The Office for National Statistics reported public sector net borrowing of £1.8 billion in July. A Reuters poll of economists had pointed to a balanced budget, while the Office for Budget Responsibility projected a £500 million surplus. Central government expenditure on social benefits was up £2 billion in July compared with a year ago. Spending on goods and services, including staff costs, rose £1.2 billion. The deficit for June was revised down sharply to £12.8 billion from £16.0 billion.
Fiscal Year Borrowing
Borrowing for the first four months of the 2026/27 financial year reached £56.7 billion, above the OBR forecast of £54.4 billion. Thomas Pugh, chief economist at RSM, said he expects government borrowing to exceed the OBR forecast over the rest of the year as spending continues to rise. Pugh said higher gilt yields, stubborn inflation, and a government determined to spend more means borrowing is on course to remain above 4% of GDP this year, instead of falling to 3.6% as projected. The current budget deficit stood at £34.7 billion over the April-July period, against the OBR's projection of £36.7 billion. Finance minister John Healey said fiscal discipline is the bedrock of UK economic stability and national security, and the government is committed to meeting its fiscal rules.
Data Revisions
The ONS has revised down its estimates for public sector net borrowing compared with the initial reading in every month this calendar year. Borrowing in May and June has been revised down by £7.5 billion combined. The debt interest bill was £700 million higher than a year ago. An ONS statistician said he expected this to rise sharply when data are released for September, reflecting inflation trends and the timing of interest payments on bonds.
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UK posts £1.8bn July deficit as spending rises
