Introduction: UK government borrowing hits second-highest level for a May
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
New data on government borrowing, and retail sales, are giving us a new insight into the state of the British economy today.
On the fiscal side, UK government borrowing hit its second-highest level for any May last month, as spending continued to outstrip tax receipts.
The UK borrowed £17.7bn in May to balance the books, £0.7bn more than in May 2024, the Office for National Statistics has reported. That’s only exceeded by May 2020, when the Covid-19 pandemic was gripping the country.
ONS deputy director for public sector finances Rob Doody explains:
“Last month saw the public sector borrow £0.7 billion more than at the same time last year, with only 2020, affected as it was by COVID-19, seeing higher May borrowing in the time since monthly records began.
“While receipts were up, thanks partly to higher income tax revenue and National Insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.”
Public sector net borrowing excluding public sector banks was £17.7 billion in May 2025. This was £0.7 billion more than in May 2024 and the second-highest May borrowing since monthly records began in 1993.
➡️ https://t.co/I4cI5aiUZ4 pic.twitter.com/LxKyTrmoh6
— Office for National Statistics (ONS) (@ONS) June 20, 2025
The report shows that central government tax receipts increased by £3.5bn to £61.7bn in May, swelled by higher income from tax – including £1.9bn more on income tax, £800m in Value Added Tax, and £600m in corporation tax.
The recent increase in employers’ national insurance rates helped to lift compulsory social contributions by £1.8bn to £15.1bn.
But, central government spending rose by £4.1bn, including:
-
A £2.8bn rise in central government departmental spending on goods and services, as pay rises and inflation increased running costs
-
A £2bn rise in net social benefits paid by central government to £27.1 billion, largely caused by inflation-linked increases in many benefits and earnings-linked increases to state pension payments
May’s borrowing leaves the UK’s net debt-to-GDP ratio at the end of May 2025 at 96.4%, 0.5 percentage points more than a year ago, and around the highest level since the 1960s.
UK net debt as a percentage of GDP Photograph: ONS
The agenda
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7am BST: UK retail sales report for May
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7am BST: UK public finances report for May
-
9am BST: European Central Bank economic bulletin
-
1.30pm BST: Philadelphia Fed manufacturing index
-
3pm BST: EU consumer confidence report
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Updated at 07.56 BST
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UK government borrowing below official forecasts…
We’re now two months into the financial year, and UK government borrowing is slightly lower than the fiscal watchog had forecast.
According to the Office for National Statistics, the UK has borrowed £37.7bn in April and May. That’s £1.6bn more than in the same period in 2024, but £2.9bn less than the £40.7bn forecast by the Office for Budget Responsibility (OBR).
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Today’s public finances report shows that the UK spent £7.6bn paying the interest on government debt in May.
That’s the second-highest May interest payable since monthly records began in 1997, but actually £700m lower than a year ago.
That fall is thanks to the drop in inflation year-on-year, which lowered the cost of servicing index-linked bonds.
A chart showing the interest payable on index-linked gilts Photograph: ONSShare
Updated at 07.55 BST
UK retail sales record biggest monthly drop since 2023
Ouch. British retail sales volumes dropped at their fastest rate since December 2023 last month, the Office for National Statistics reports.
The latest retail sales report shows that volumes fell by 2.7% month-on-month in May, and were 1.3% lower than a year ago. That’s a worrying sign that consumer demand may have weakened last month.
The decline was, apparently, driven by a drop in food store sales volumes, after a strong rise in April.
Food store sales volumes fell back in May, following strong sales in April. Feedback suggested reduced purchases for alcohol and tobacco with customers choosing to make cutbacks.
Clothing and household goods stores reported slow trading due to reduced footfall. pic.twitter.com/g5aIdbNOrN
— Office for National Statistics (ONS) (@ONS) June 20, 2025
ONS senior statistician Hannah Finselbach says:
“Retail sales fell sharply in May with their largest monthly fall since the end of 2023.
“This was mainly due to a dismal month for food retailers, especially supermarkets, following strong sales in April. Feedback suggested reduced purchases for alcohol and tobacco with customers choosing to make cutbacks.
“The falls were consistent across all sectors with clothing and household goods stores reporting slow trading due to reduced footfall. There was also decreased demand for DIY items as consumers took advantage of the good weather over the previous few months.
“Looking at the wider picture, retail sales are still up across the latest three-months as a whole.”
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Introduction: UK government borrowing hits second-highest level for a May
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
New data on government borrowing, and retail sales, are giving us a new insight into the state of the British economy today.
On the fiscal side, UK government borrowing hit its second-highest level for any May last month, as spending continued to outstrip tax receipts.
The UK borrowed £17.7bn in May to balance the books, £0.7bn more than in May 2024, the Office for National Statistics has reported. That’s only exceeded by May 2020, when the Covid-19 pandemic was gripping the country.
ONS deputy director for public sector finances Rob Doody explains:
“Last month saw the public sector borrow £0.7 billion more than at the same time last year, with only 2020, affected as it was by COVID-19, seeing higher May borrowing in the time since monthly records began.
“While receipts were up, thanks partly to higher income tax revenue and National Insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.”
Public sector net borrowing excluding public sector banks was £17.7 billion in May 2025. This was £0.7 billion more than in May 2024 and the second-highest May borrowing since monthly records began in 1993.
➡️ https://t.co/I4cI5aiUZ4 pic.twitter.com/LxKyTrmoh6
— Office for National Statistics (ONS) (@ONS) June 20, 2025
The report shows that central government tax receipts increased by £3.5bn to £61.7bn in May, swelled by higher income from tax – including £1.9bn more on income tax, £800m in Value Added Tax, and £600m in corporation tax.
The recent increase in employers’ national insurance rates helped to lift compulsory social contributions by £1.8bn to £15.1bn.
But, central government spending rose by £4.1bn, including:
-
A £2.8bn rise in central government departmental spending on goods and services, as pay rises and inflation increased running costs
-
A £2bn rise in net social benefits paid by central government to £27.1 billion, largely caused by inflation-linked increases in many benefits and earnings-linked increases to state pension payments
May’s borrowing leaves the UK’s net debt-to-GDP ratio at the end of May 2025 at 96.4%, 0.5 percentage points more than a year ago, and around the highest level since the 1960s.
UK net debt as a percentage of GDP Photograph: ONS
The agenda
-
7am BST: UK retail sales report for May
-
7am BST: UK public finances report for May
-
9am BST: European Central Bank economic bulletin
-
1.30pm BST: Philadelphia Fed manufacturing index
-
3pm BST: EU consumer confidence report
Share
Updated at 07.56 BST
