UK public-sector net borrowing hit £20.7 bn in June, according to figures published by the Office for National Statistics (ONS) this morning — marking the second-highest June deficit on record, exceeded only by the pandemic year. The shortfall was £6.6 bn higher than in June 2024, and £3.5 bn above the Office for Budget Responsibility’s (OBR) latest forecast for the month.
The gap was driven by a sharp surge in central government debt-interest payments, which reached £16.4 bn in June, fuelled by a significant uplift on index-linked gilts tied to the retail price index. According to ONS tables, RPI-linked capital uplift alone accounted for £10.9 bn of the monthly interest bill. This brought the fiscal year-to-date total for April through June to £57.8 bn, now running above the OBR’s projected path for 2025.
Receipts were comparatively strong, with income tax and National Insurance contributions leading a £5.7 bn year-on-year increase in central government revenue. VAT also contributed an extra £0.7 bn versus the same month last year. However, these gains were outweighed by rising expenditure: central government current spending rose by £12.4 bn, largely due to higher pay settlements and inflation-linked benefit costs. Net public investment softened slightly to £4.4 bn.
Financial markets responded to the ONS release with a move in gilt yields, as the benchmark 10-year yield climbed to 4.67 % during morning trading. Analysts attributed the reaction to expectations that the Debt Management Office will need to increase bond issuance targets in the months ahead. Sterling traded flat near $1.343, while short-sterling futures fell on the news.
Economists noted that June is typically a strong month for receipts, which makes the size of the overshoot more notable. May’s borrowing figure of £17.7 bn was already seen as worrying; the June outcome intensifies scrutiny of the government’s fiscal position as the year progresses.
Chancellor Rachel Reeves now faces additional pressure to meet her pledge to have debt falling as a share of GDP by 2028/29. The OBR’s monthly profiles show the cumulative deficit has shifted from an early-year undershoot to an overshoot, with fiscal headroom narrowing by £3.5 bn since the start of the summer.
Opposition parties have pointed to the latest figures as evidence of rising fiscal risks, calling for clearer plans to manage the growing cost of debt. Government officials insist that their rules allow time for adjustment, but markets will be watching the Autumn Budget for further details on revenue and spending measures.
As the Treasury prepares its next fiscal statement, the task of managing higher debt-servicing costs and volatile revenues has grown — and June’s figures underscore the challenge facing economic policymakers this year.
