UK Government on Track to Cut Borrowing Ahead of Budget

By Paul Hannon

The U.K. government cut borrowing in the first six months of its fiscal year, but at a slower pace than planned, underlining the challenges posed by rising prices and higher interest payments as it prepares to deliver its budget next week.

The budget comes as the U.K. is enjoying some time out of the limelight, having been a key focus of concern for investors following surprise tax cuts announced by then Prime Minister Liz Truss in 2022, which led to a sharp fall in the prices of government bonds.

For now, attention has switched to the governments of France and the U.S., both of which have larger budget gaps and debts that are rising much more quickly. Indeed, figures released by the Office for National Statistics on Wednesday suggest the U.K. is on course for a second straight year of declining borrowing.

"The UK is one of only a few major economies to be undertaking active fiscal consolidation," economists at BNP Paribas wrote in a note to clients.

That consolidation is not going exactly as planned. The ONS said that government spending exceeded its revenues by 24.5 billion pounds in September, an increase in the budget deficit of 1.8 billion pounds from the same month in 2025.

For the fiscal year to date, borrowing totaled 97.8 billion pounds, a decline of 4.4 billion pounds compared with the same period last year, but 6 billion pounds above projections published by the Office for Budget Responsibility in March.

The overshoot partly reflects the increased costs of providing government services as energy prices have risen since the start of the war between the U.S. and Iran. Higher prices are also raising the cost of paying interest, since the U.K. has a higher share of bonds with payouts linked to inflation than its peers.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

October 21, 2026 02:38 ET (06:38 GMT)