20 March 2026
If you are covering the latest UK public finances data, please find below a comment from Lindsay James, investment strategist at Quilter:
“Last month we had some glimmers of hope that government borrowing was beginning to be reined in as tax rises helped to create the largest January surplus on record. The latest data out this morning, however, has put a swift end to that picture. Borrowing was £14.3bn in February, £2.2bn more than the same month last year and the second highest February on record. This is largely due to record levels of interest payable, highlighting the sheer scale of debt interest the government is now facing as debt stands at 93.1% of GDP.
“Borrowing is expected to be lower this year and continue its decline as the government back ends spending decisions and potentially cuts. That said there are two concerns here for the government. Firstly, it is expecting the tax take to do a lot of the heavy lifting when it comes to day-to-day spending, but this will in itself weigh down on growth given where the current tax burden sits.
“Secondly, as evidenced yesterday, yields on government debt are somewhat at the mercy of events in the Middle East. The Bank of England yesterday confirmed that the inflation outlook has altered dramatically as a result of the rise in energy prices and that it stands ready to do what it can to keep it in check. The market has taken this to mean potentially two interest rate rises could be on the cards, increasing the cost of government borrowing and hindering its ability to spend elsewhere or bolster the public finances.
“With UK growth already challenged, such a scenario of higher inflation and weaker growth playing out would be a really bad place to be given the level of inflation-linked costs such as welfare, with the debt markets likely to have to be tapped in order to fund the government’s priorities. The UK still carries a yield premium compared to peers, and even if borrowing is coming down for now, it isn’t doing enough to wipe this out. The government’s finances are likely in for a rocky period due to events out of their control yet again.”
