22 May 2026
If you are covering the latest UK public sector finances from the Office for National Statistics, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Today’s public sector finances reveal an economy that is still reliant on investors helping to fund both investment and day to day spending in the UK. Borrowing was £24.3bn in April, 25% higher than the same month last year, comfortably above what the Office for Budget Responsibility was forecasting and the highest April figure since the pandemic. Meanwhile the budget deficit stood at £17.4bn for the month, again much higher than forecasts expected. The good news is that for the financial year ending in March borrowing was down compared to the year prior, but only marginally. It will be interesting to see, in light of recent events, if this government will commit to the spending cuts expected towards the end of this parliament or if they will continue to tap investors to keep spending high.
“There has been a lot of talk in recent weeks about the potential flexibility in the fiscal rules, with the IMF urging the UK not to tinker and aim to reduce the budget deficit instead. Based on today’s figures, that deficit will be difficult to close, especially with additional cost of living measures being announced. Ultimately, the focus will shift onto personal taxation again when the Budget comes around as the government looks to fund spending commitments while still waiting for growth to pick up, and particularly if events in the Middle East cannot be resolved.
“The reality is that gilt yields remain highly elevated, both compared to history and to peers. The 10-year yield continues to hover around the 5% mark, a symbolic point that will induce a sense of nervousness within government as it looks to grow the economy, keep borrowing down and quell inflation. For as long as yields remain that high, this will be difficult to achieve. Political volatility has returned to British politics too, and with the result of the crucial Makerfield by-election potentially deciding the future leadership, and thus economy policy, of the country, borrowing costs are likely to be volatile should bond markets see a lurch to the left by Labour.”
