Britain’s borrowing in February exceeded forecasts, underscoring the fragility of the public finances even before the war in Iran altered the economic outlook.
According to the Office for National Statistics, the gap between spending and tax revenues reached £14.3 billion ($19.2 billion). This was significantly higher than the £8.8 billion deficit economists had predicted and roughly double the estimate made by the Office for Budget Responsibility in November. It marked the second-largest February deficit on record.
In the first 11 months of the 2025–26 fiscal year, borrowing totaled £125.9 billion—£11.9 billion less than in the same period a year earlier. Even so, the figures point to a risk that the full-year deficit will exceed the OBR’s updated forecast of £132.7 billion.
The widening of the deficit in February was driven by higher debt-servicing costs, alongside increased spending on public services and welfare payments. Additional outlays of £10.8 billion outpaced the £8.6 billion rise in tax receipts.
The public finances now face the risk of veering off course amid a surge in energy prices triggered by the conflict in the Middle East.
The crisis has driven up UK government borrowing costs, heightened the risk of renewed job losses, and prompted calls for additional support for households. It may complicate Chancellor Rachel Reeves’s commitment to balanced-budget rules and carry implications for financial markets.