22 January 2026
If you are covering the latest public sector finances data from the Office for National Statistics, please find below a comment from Lindsay James, investment strategist at Quilter:
“While all eyes remain on Davos and the implications of President Trump’s diplomatic style, the Office for National Statistics has provided the government with a reminder of the stakes at play with the latest borrowing figures. Borrowing for the financial year has reached £140.4bn, marginally down on last year, but still the third highest on record. The good news is that borrowing for December was down 38% on last year, but the government continues to need to borrow to fund day to day spending and this shows no signs of stopping any time soon.
“The good news for the UK economy is the yield premium on borrowing compared to developed market peers has narrowed somewhat in recent weeks. Now, some of this will be related to the volatility brought on by a flurry of announcements from President Trump that have spooked equity investors, but markets will also be pleased to see Rachel Reeves commit to no more significant tax rises while at Davos. Of course, this is a promise she has rowed back on previously, and the UK economy has shown a tendency of false dawns in the past, with last year a prime example after growth in the first quarter quickly dissipated, leaving the economy flatlining as it entered 2026. But with growing expectations that inflation could come down more quickly than previously expected from Q2, alongside a clearly weakening labour market and signals that future government bond issuance will favour short term bonds over longer term lending, this has created a backdrop supportive of lower yields on long term bonds.
“The government will be hoping diplomacy can help calm any further economic storms as Trump promises a fresh wave of tariffs. But as we have seen, the global economic picture can change in a whim, and as such the UK needs to get the economy humming once more so that it is in control of its own destiny. Until that point, and while borrowing remains very high, the Treasury remains in a very tight spot when it comes to meeting the fiscal rules.”
