UK government borrowing rose sharply in May, raising fresh concerns over the public finances, as retailers continue to face fragile consumer confidence and cost pressure.
Britain borrowed £23.3bn last month, £5.4bn more than in May last year and the highest figure for the month since 2020, when the country was under Covid lockdown restrictions.
The figure was also £5.6bn above the £17.7bn forecast by the Office for Budget Responsibility, increasing pressure on the government as it seeks to stay within its fiscal rules.
Borrowing for the financial year to date has reached £46.3bn, leaving the UK £7.7bn above the OBR’s forecast after just two months.
The latest figures pushed public sector net debt to 95.1 per cent of GDP, a level last seen in the early 1960s.
The rise comes as retailers continue to monitor the impact of higher borrowing costs, volatile energy prices and renewed uncertainty in the Middle East, with the conflict having already pushed up oil prices and fuel costs.
UK gilt yields rose in early trading following the borrowing figures, with the yield on 10-year government bonds climbing to 4.799 per cent and 30-year yields rising to 5.5 per cent.
Higher borrowing costs can add pressure across the economy, with businesses and consumers already facing elevated prices, weak confidence and limited room for discretionary spending.
The figures also prompted a political backlash. Shadow chancellor Mel Stride claimed UK borrowing was “out of control”, pointing to the 30 per cent year-on-year rise in May’s deficit.
“Borrowing is out of control, up by 30 per cent compared to last year,” he said.
Stride also claimed bond markets were “watching nervously” amid speculation over Labour’s future economic direction following Andy Burnham’s victory in Makerfield.
However, the borrowing figures underline the wider challenge facing any government, with debt remaining high and the cost of servicing that debt rising as inflation-linked payments increase.
The figures come after official data showed retail sales volumes rose more strongly than expected in May, helped by warm weather and retailer promotions.
However, consumer confidence remains subdued. A separate survey published on Friday showed households were the least willing to make major purchases since January 2025, while younger consumers became the least optimistic in two years about the economy and their own finances.
Retailers have also warned that the Middle East conflict is creating uncertainty for shoppers, with the risk of higher petrol and energy costs putting further strain on household budgets later in the year.
Click here to sign up to Retail Gazette‘s free daily email newsletter
