UK Borrowing in April Reaches Highest Level Since Covid Pandemic

Borrowing in April hit highest level since Covid

UK borrowing last month hit the highest total for April since the Covid pandemic in 2020, highlighting the challenges facing the government.

Public sector borrowing, the difference between spending and income from taxes, was £24.3bn last month, official figures showed, which was up £4.9bn from a year earlier and higher than expected.

Separate data showed retail sales volumes fell in April by the fastest pace for almost a year, after the jump in petrol prices hit demand for fuel.

The latest figures "highlight the deteriorating growth outlook and fragile fiscal backdrop that will face whoever is in 10 Downing Street", said Ruth Gregory, deputy UK chief economist at Capital Economics.

Office for National Statistics (ONS) chief economist Grant Fitzner said April's borrowing figure was "substantially higher" than a year earlier, with higher tax receipts being "more than offset by higher spending on benefits and other costs".

Spending on benefits rose by £2.7bn, which the ONS said was largely caused by inflation-linked increases to many benefits and the earnings-linked rise to the state pension.

Debt interest payments hit a record high for the month of April of £10.3bn, up £0.9bn from a year earlier.

The surge in energy prices since the beginning of the Iran war has prompted analysts to cut their growth predictions for the UK economy, with households facing higher fuel bills and the Bank of England no longer expected to cut interest rates.

Weaker economic growth is likely to lead to a slower increase in overall revenues from taxes, although the government might gain extra income from taxes on petrol and North Sea oil and gas.

Borrowing costs - as indicated by yields on government bonds, or gilts - have risen since the beginning of the conflict, with financial markets indicating that they think the Bank might have to raise rates to rein in inflation.

While borrowing costs have risen for nearly all governments since the Iran war began, the uncertainty surrounding the leadership of the Labour party has also been cited as a factor driving up the UK's costs.

"We estimate that debt interest costs in 2026/27 will be about £15bn higher than assumed in the Budget if gilt yields hold at current levels for the rest of the year," said Rob Wood, chief UK economist at Pantheon Macroeconomics.

He added that "political risk" had added to the UK's borrowing costs, and he expects them to remain "more elevated than they otherwise would be this year".

The government is also spending on measures to try to counter the rise in the cost of living.

On Thursday, it announced a cut in VAT on tickets for family days out, free bus journeys for under-16s in England in August and cuts to import taxes on some basic foods. To help fund this the government is changing the tax rules for some UK-based oil and gas companies.

Dennis Tatarkov, senior economist at KPMG UK, said the lower growth forecasts for the UK meant that "public sector borrowing is likely to remain elevated in the medium term, potentially forcing the chancellor's hand to make more tweaks to fiscal policy at the time of the autumn Budget".

In March's Spring Statement, the government's independent forecaster, the Office for Budget Responsibility (OBR), forecast that the headroom Chancellor Rachel Reeves had against her rule not to borrow to fund day-to-day spending in five years' time was £23.6bn. However, the OBR's forecast was made before the Iran war began.

The Chief Secretary to the Treasury, Lucy Rigby, said the government was "cutting borrowing and debt – with our actions reducing government borrowing by over £20 billion last year".

"Working families have benefited from falls in inflation and cuts to interest rates - and our non-negotiable fiscal rules will be all the more important to continue to protect them as we face the consequences of the war that we have played no part in," she added.

Shadow chancellor Mel Stride highlighted how "debt interest spending was the highest of any April on record".

"The recent spike in borrowing costs shows markets are increasingly worried about Keir Starmer's replacement," he added.

The retail sales data from the ONS showed that volumes fell by 1.3% in April. That was the biggest monthly fall since May 2025 and reversed a 0.6% rise in the previous month.