The UK government borrowed £23.3bn in May, up almost a third from the same month last year and £5.6bn more than the Office for Budget Responsibility (OBR) forecast, according to official data from the Office for National Statistics (ONS). The figure — the difference between spending and tax income — underscores what economists describe as 'fragile' public finances that will constrain the next prime minister.
Borrowing overshoots OBR forecast
May's borrowing figure was £5.6bn higher than the OBR's March forecast, which did not fully account for the impact of the war in the Middle East. 'The big picture is that the public finances are fragile,' said Ruth Gregory, deputy chief UK economist at Capital Economics. She added this would constrain whoever is prime minister.
ONS statistician Tom Davies said spending on debt interest, public services, investment and benefits all increased in May 2026 compared with last May, outweighing higher tax receipts.
| Metric | May 2026 | Change vs May 2025 | OBR Forecast |
|---|---|---|---|
| Borrowing | £23.3bn | +30% | £17.7bn |
| Debt interest payable | £11.7bn | Highest ever May | - |
| Retail sales | +1.2% | - | - |
Record debt interest costs
Interest payable on government debt jumped to £11.7bn — the highest ever recorded in any May, the ONS said. Danni Hewson, head of financial analysis at AJ Bell, noted that much of the jump in borrowing costs was the result of higher inflation. Inflation surged when the Iran conflict broke out and is expected to rise further due to knock-on effects of higher oil prices.
'Long-term borrowing costs have been creeping up and will be monitored closely if the anticipated Labour leadership contest gets under way,' Hewson said.
Political implications and fiscal rules
The borrowing data comes as Andy Burnham, Greater Manchester mayor, was elected MP for Makerfield in a by-election, paving the way for a leadership challenge against the Prime Minister. Burnham has drafted economic heavyweights to shore up his credentials and pledged to follow existing fiscal rules, which include not borrowing to fund day-to-day spending, according to the report.
Susannah Streeter, chief investment strategist at Wealth Club, said investors seem to have priced in the likelihood of a Labour leadership challenge. 'For now, that may be because Andy Burnham has promised to be more cautious about spending by largely sticking to fiscal rules. His pledge to bring down huge welfare costs, partly to fund higher defence spending, is a signal that he is positioning himself closer to the political centre, which may be providing some reassurance,' she said.
Chief Secretary to the Treasury Lucy Rigby said: 'The war in the Middle East has clearly had an impact on economies around the world. We have the right economic plan to deal with these challenges — protecting families and businesses from rising costs, while cutting borrowing at a faster rate than any other G7 economy.'
Shadow Chancellor Mel Stride countered: 'Borrowing is out of control. The Conservatives are the only party with a plan to balance the books by getting spending under control, especially the welfare bill.'
Retail spending provides mixed signal
Separate official figures showed retail spending rose by 1.2% in May, helped by unseasonably good weather. Retailers reported higher sales of outdoor furniture and fans due to weather conditions and promotions.
The Bank of England opted to hold interest rates on Thursday, balancing a sluggish jobs market and widespread expectations that inflation will rise further in the coming months.
For investors and corporate strategists, the sustained rise in borrowing and debt interest costs signals limited fiscal headroom for any new government. The next OBR forecast — likely to incorporate the full impact of the Middle East conflict—will be a key marker for bond markets and business confidence.
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