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Economy
Jun 22, 2026
Analyzed by Llama- 4 Scout 17B 16E Instruct

UK Borrowing Surges to £23.3bn in May as Iran War Impact Hits Economy

AI Summary
The UK's public sector net borrowing reached £23.3bn in May, exceeding forecasts due to the economic impact of the Iran war, with debt interest costs and inflation pushing up spending.

The Unexpected Borrowing Surge

The UK borrowed a higher-than-expected £23.3bn in May amid the economic fallout from the Iran war, underlining the fiscal pressures facing Andy Burnham if he takes over as the Labour leader.

Borrowing Details and Forecasts

In figures released shortly after Burnham's victory in the Makerfield byelection, the Office for National Statistics (ONS) said public sector net borrowing – the difference between government spending and income – for the month was the second highest for any May on record.

  • City economists had expected much lower borrowing of £18.5bn, down from a revised £23bn in April.
  • Borrowing was £5.6bn ahead of the forecast published alongside the chancellor Rachel Reeves's spring statement in March.

The Data Analysis

With debt interest costs higher than expected as financial markets responded to the Middle East conflict, borrowing increased significantly.

  • Debt interest payments were £11.7bn in May – £4.1bn more than a year ago.
  • Tax revenues were up £3.4bn, or 4.1%, on a year ago, at £85.5bn, with the VAT and income tax take up.

The Impact Analysis

The economic impact of the Iran war has led to increased spending and borrowing, with inflation holding steady at 2.8% last month, higher than expected.

  • Martin Beck, the chief economist at WPI Strategy, noted that political uncertainty could lead to higher gilt yields and mortgage rates.

The Prediction

Whoever takes over as the Labour leader could face pressure from bond markets, nervous about what a change of leadership would mean for growth and taxation.

  • Lucy Rigby, the chief secretary to the Treasury, stated that the government has the right economic plan to deal with these challenges.