Official figures showed borrowing was nearly a third higher than a year earlier amid rising debt costs

Government borrowing surged to £23.3billion in May, official figures showed, marking an increase of nearly a third compared with the same month last year and exceeding economists' expectations.

The Office for National Statistics (ONS) reported borrowing was £5.4billion higher than in May 2025, representing an increase of 30.4 per cent.

Interest payments on Government debt reached £11.7billion, the highest figure ever recorded for the month of May.

Government borrowing costs are the interest the UK has to pay to investors who lend it money, and those costs rise when inflation or gilt yields go up.

The latest borrowing figures were significantly above forecasts from City economists, who had expected borrowing of around £18.8billion, and the Office for Budget Responsibility's projection of £17.7billion.

Higher Retail Prices Index inflation increased costs associated with index-linked Government bonds, contributing to a £4.1billion rise in debt interest payments.

The impact of tensions in the Middle East on Britain's public finances has become an increasing focus for economists, with long-term borrowing costs rising amid concerns about weaker growth prospects.

Gilt yields climbed to their highest level in almost three decades last month, placing additional pressure on the Treasury's finances.

Tom Davies, ONS senior statistician, said: "Borrowing in the first two months of the financial year was nearly £9billion higher than the same period of 2025."

Mr Davies added: "Spending on debt interest, public services, investment and benefits all increased in May 2026, compared with last May, more than outweighing higher tax receipts."

Public sector net debt as a proportion of gross domestic product edged up to 95.1 per cent.

Chief Secretary to the Treasury Lucy Rigby said: "Inflation has held steady and unemployment has fallen this week, but the war in the Middle East has clearly had an impact on economies around the world."

She added: "We have the right economic plan to deal with these challenges protecting families and businesses from rising costs, while cutting borrowing at a faster rate than any other G7 economy."

Borrowing during the first two months of the financial year totalled £46.3billion, which was £8.9billion higher than during the same period in 2025.

The figure represents an increase of almost a quarter year-on-year and was £7.7billion above projections from the Office for Budget Responsibility (OBR).

The budget deficit stood at £18.5billion in May, while total Government borrowing during the previous financial year amounted to £132.7billion.

The publication of the borrowing data coincides with Andy Burnham's victory in the Makerfield by-election, a result some analysts believe could have implications for Labour's future fiscal direction.

Richard Carter, head of fixed interest research at Quilter Cheviot, said: "Today's borrowing figures put the challenges facing Andy Burnham into sharp contrast should he now go on to contend for the leadership of the Labour Party and thus the country."

Mr Carter added: "Mr Burnham has achieved his first goal of returning to parliament, with a resounding victory in the Makerfield by-election likely to now propel him to number ten.

"However, markets await to see just how quickly he looks to strike and ultimately seize the premiership from Keir Starmer, and what his economic plan looks like exactly."