UK borrowing rises as public debt exceeds £3tn

UK public sector debt has exceeded £3tn for the first time in cash terms, while borrowing reached £24.5bn in September, increasing pressure on the public finances ahead of the autumn Budget.

The Office for National Statistics reported that borrowing was £1.8bn, or 7.7%, higher than in September 2025 and £1.9bn above the Office for Budget Responsibility’s forecast. It was the second highest September borrowing figure on record, surpassed only by the exceptional pandemic-period figure for 2020, before adjusting for inflation.

Central government borrowing was £21.2bn, up from £19.7bn a year earlier. Local government borrowing increased to £2.9bn, compared with £2.4bn. The public sector total also includes other bodies and accounting adjustments, making the headline figure broader than the central government’s monthly deficit.

The increase arose as spending grew faster than receipts. Central government debt interest payable reached £10.9bn during September, £1.6bn above the corresponding month a year earlier and £2bn above the OBR’s monthly forecast. Inflation affects interest on index-linked borrowing and can also influence nominal tax revenues and some areas of public expenditure.

The provisional debt stock above £3tn is a record in cash terms, but debt as a percentage of the economy was lower than a year earlier. This distinction matters when assessing the government’s fiscal position because nominal debt tends to rise over time alongside prices and economic activity; its scale relative to national output provides another measure of the burden.

The monthly figures also need to be viewed alongside the financial year. Borrowing between April and September totalled £97.8bn, £4.4bn below the comparable period in 2025 but £6bn above the OBR forecast. That contrast shows why an unusually costly month does not necessarily determine the full-year trend, and why forecasts can diverge even when year-on-year borrowing falls.

The current budget deficit, which records borrowing to finance day-to-day public sector spending, was £15.8bn in September. Fiscal assessments distinguish this from investment-related expenditure because the economic effects and financing arrangements can differ. However, governments must still service borrowing undertaken for either purpose.

The figures arrive one week before the Budget scheduled for 28 October, when the OBR will publish updated economic and fiscal forecasts. The existing monthly comparison uses assumptions made in March; it cannot establish in advance what new forecasts or policy changes will be announced.

Businesses face uncertainty over how fiscal pressures may affect taxation, procurement and investment spending. Contractors supplying public services, companies planning capital expenditure and employers sensitive to payroll taxes may all be exposed to different decisions. Yet the latest borrowing data do not imply that a particular tax rise or spending cut has already been chosen.

Bond market conditions also matter because the Treasury must refinance maturing liabilities as well as finance new borrowing. The Bank of England determines monetary policy to meet its inflation remit independently of the government’s immediate financing requirements, although market rates influence the cost of issuing debt.

For corporate planning, the most useful distinction is between the known fiscal starting position and policy choices still to come. September’s deficit is measured, while the impact of next week’s Budget will depend on enacted measures, updated assumptions and the response of households and companies.

In the monthly data, the increase in debt interest was especially notable because it exceeded the OBR’s September estimate by £2bn. That variance is larger than the £1.9bn gap between total monthly borrowing and forecast, although offsets arise elsewhere in the accounts. It demonstrates why a headline borrowing gap should not be assigned to a single cause without examining tax receipts, departmental spending and accounting movements. The ONS also warns that initial public finance estimates can be revised as additional information becomes available.

The ONS will release October public sector finance figures on 20 November, when there will be further evidence of how the financial year is progressing after the Budget. Until then, the September figures show rising borrowing and interest costs without resolving the broader fiscal outlook.