The UK borrowed £23.3bn in May, official figures show – almost a third more than the same month last year and £5.6bn above the Office for Budget Responsibility’s forecast. The surge was driven by soaring debt interest, which hit a record £11.7bn for any May, as inflation fuelled by the Middle East war pushed up borrowing costs.
“The big picture is that the public finances are fragile,” said Ruth Gregory, deputy chief UK economist at Capital Economics. She warned this would constrain whoever is Prime Minister. The warning came as Greater Manchester mayor Andy Burnham was elected MP for Makerfield in a by-election, clearing a path for him to launch a leadership challenge against the Prime Minister.
“UK borrowing surged to £23.3bn in May, £5.6bn above forecast, as Asda losses neared £1bn.”
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. Danni Hewson, head of financial analysis at AJ Bell, noted that much of the jump in borrowing costs was the result of higher inflation, which spiked when the Iran conflict broke out and is expected to rise further due to knock-on effects from higher oil prices.
Investors seem to have priced in the likelihood of a Labour leadership challenge, according to Susannah Streeter, chief investment strategist at Wealth Club. “For now, that may be because Andy Burnham has promised to be more cautious about spending by largely sticking to fiscal rules,” she said. “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.”
On Thursday, the Bank of England opted to hold interest rates, balancing a sluggish jobs market against expectations that inflation will rise further. Chief Secretary to the Treasury Lucy Rigby blamed the Middle East war, saying: “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.”
Separately, Asda slumped deeper into the red last year, with losses approaching £1bn. Accounts show the supermarket was hit by price cuts to lure back shoppers from discounters like Aldi, as well as one-off costs.