21 October 2025
If you are covering the latest public sector borrowing statistics, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“While the recent fall in gilt yields will have provided Chancellor Rachel Reeves some respite ahead of the crunch Budget statement next month, today’s borrowing figures highlight the predicament she finds herself in. The government borrowed an eye watering £20.2bn in September, the highest September borrowing since the depths of the pandemic in 2020. Borrowing in this financial year has almost breached £100bn too, 13% higher than last year and the second highest after the pandemic year of 2020. Labour is finding it is having to borrow to fund day to day activities and as such this comes with consequences.
“The UK economy is in a fragile state, but for now does not appear to be showing signs of breaking. Indeed, comparative economies are having similar, if not worse, problems from a political and economic standpoint. However, today’s figures show that increased borrowing from this level is simply not an option given the yield premium UK debt comes with, along with its own inflation problem. Therefore, if Reeves and the Treasury are to bring borrowing down, a combination of tax rises and spending cuts and required. The former appears to be nailed on at November’s Budget, but how willing this Labour government is to cut spending remains to be seen. Previous episodes suggest not very
“Without a shift in the fiscal rules once again, the UK economy is in somewhat of a straitjacket. Fiscal headroom is all but non-existent, and the growth that is required to create it is being hampered by a high tax burden and uncertainty of more revenue raising measures from the government to come. The economic winds are refusing to blow in the UK’s direction, but the recent fall in gilt yields have bought some breathing room. What the government does with that will be watched very closely at the despatch box next month.”
