UK government borrowing climbed higher than expected in April as rising inflation increased spending on pensions and welfare payments, adding fresh pressure to public finances amid the Iran war and growing political uncertainty in Britain.
Figures released by the Office for National Statistics showed public sector net borrowing reached £24.3 billion in April 2026 — £4.9 billion higher than the same month last year.
The borrowing figure was also £3.4 billion above forecasts from City economists and the Office for Budget Responsibility.
Analysts said the increase reflects rising government spending alongside higher borrowing costs caused by global market instability and uncertainty surrounding the Labour leadership battle.
The UK’s debt interest payments rose to £10.3 billion during April — the highest level ever recorded for the month and £900 million more than a year earlier.
Grant Fitzner said increased spending on benefits and pensions was a major factor behind the rise.
“Borrowing this month was substantially higher than in April last year and although receipts increased compared with April 2025, this was more than offset by higher spending on benefits and other costs,” he said.
Financial markets have become increasingly nervous in recent weeks amid concerns over the economic impact of the Iran conflict and uncertainty surrounding Prime Minister Keir Starmer’s political future.
UK government bonds, known as gilts, have faced heavy selling pressure as investors worry a future leadership change could lead to higher public spending and borrowing.
Earlier this week, the International Monetary Fund urged Britain to “stay the course” with Chancellor Rachel Reeves’s plans to reduce borrowing, warning that the UK has limited room to increase debt further.
Martin Beck said financial markets remain crucial for funding government spending.
“A future prime minister may rail against being ‘in hock’ to the bond markets, but that’s a difficult argument to sustain for a government on course to borrow well over £100bn this year,” he said.
The ONS said inflation-linked increases to benefits payments and the pensions triple lock significantly contributed to higher public spending.
Net social benefits paid by central government rose by £2.7 billion to £29.5 billion in April alone.
Despite the latest borrowing increase, Britain’s economy performed better than expected at the start of 2026 before the outbreak of the Iran war.
The ONS revised down its estimate for total government borrowing during the financial year ending March 2026 to £129 billion — £3 billion lower than previously forecast and 15% below the previous year’s level.
Lucy Rigby defended the government’s economic strategy and said public borrowing had already fallen significantly over the past year.
“Earlier this week the IMF agreed we had the right economic plan to reduce the deficit,” Rigby said.
“We are cutting borrowing and debt – with our actions reducing government borrowing by over £20bn last year – while driving growth through £120bn of additional capital investment over the parliament.”
