Britain’s Borrowing in March Exceeded Forecasts and Reached £12.6 Billion

According to the Office for National Statistics, the figure came in above the £10.3 billion forecast by economists polled by Reuters, although borrowing was £1.4 billion lower than in March last year.

For the full fiscal year ending in March, borrowing totaled £132 billion. That was 13.1% lower than a year earlier and slightly below the Office for Budget Responsibility’s March forecast of £132.7 billion.

ONS senior statistician Tom Davis said: “Although spending rose in this fiscal year, that was more than offset by higher receipts.”

But Martin Beck, chief economist at consultancy WPI Strategy, warned that “the latest data may prove a poor guide to what comes next” as the war in the Middle East darkens the outlook.

He said higher oil and gas prices could lift revenues from North Sea production, while faster inflation may boost VAT and income tax receipts through frozen tax thresholds.

But, he added, “those gains are likely to be outweighed by weaker economic growth and rising spending pressures, including higher welfare costs, increased debt-servicing payments, and possible support for households and energy-intensive companies.”

The rise in energy prices caused by the conflict has driven up borrowing costs for the British government, although gilt yields have already retreated from their peak levels.

The government has ruled out broad support for household energy bills and instead announced measures aimed at breaking the link between gas and electricity prices. These include, in particular, long-term fixed-price contracts for renewable energy. The authorities have also introduced targeted aid for households that rely on heating oil.

Capital Economics economist Ruth Gregory estimated that the energy shock would push borrowing an eye-catching £29 billion above the OBR forecast in fiscal year 2026/27, and by about £13 billion in the years that follow.

Although borrowing for the full fiscal year came in slightly below the OBR forecast, “we do not expect that improvement to last for long,” she said.

Earlier this week, the Resolution Foundation said a serious but realistic escalation of the conflict could increase borrowing by £16 billion.

In March, central government current spending rose by £2.9 billion compared with the same month last year because of higher wages and inflation.

At the same time, revenues increased by £5.4 billion thanks to resilient tax receipts, partly as a result of the higher employer National Insurance contribution rate introduced in April 2025 and strong wage growth.

In the fiscal year ending in March, spending on public services, welfare payments, and debt servicing rose by £72.2 billion compared with the previous fiscal year.

At the same time, central government tax receipts and National Insurance contributions increased by £87.7 billion, or 9.1%, compared with the previous period.

Since the end of the pandemic period, annual government borrowing has remained broadly stable, holding in a range of 4% to 5% of GDP.