The UK government borrowed £23.3 billion in May, a figure so large it hasn’t been matched for that month since the pandemic peak of 2020. The Office for National Statistics published the data on June 19, and the numbers tell a story of a fiscal picture deteriorating faster than anyone in Whitehall predicted.

That May figure represents a 30% jump from the £17.9 billion recorded in the same month last year. It also overshot the Office for Budget Responsibility’s forecast of £17.7 billion by £5.6 billion.

Where the money went

The single biggest culprit is debt interest. Central government debt interest payments hit a record £11.7 billion for the month, a 54% increase compared to May 2025.

Inflation is the engine behind that surge. A significant portion of UK government debt is linked to the Retail Prices Index, meaning when inflation rises, so do the interest payments.

Total public sector spending rose by £9.1 billion year-on-year, reaching £118 billion in May alone. Government receipts climbed £3.7 billion to £94.8 billion.

Public sector net debt now stands at 95.1% of GDP, up 0.4 percentage points from a year earlier.

Two months in, already off track

May wasn’t an isolated stumble. April’s net borrowing came in at £24.3 billion, blowing past its own OBR forecast of £20.9 billion. Combined, the first two months of the current financial year have produced £46.3 billion in borrowing, running £7.7 billion ahead of the OBR’s projection for March.

The only May that saw worse borrowing was 2020, when the UK was in full pandemic lockdown mode and the government was essentially paying millions of workers to stay home through the furlough scheme. That month hit £51.1 billion. The current figure is the second-highest ever recorded for May.

Economic pressures stemming from the ongoing Middle East conflict have been cited as a contributing factor to the broader trend, adding fuel to inflationary forces that were already proving stubborn to tame.

What this means for investors and risk assets

Fiscal deterioration at this pace has real implications for monetary policy. The Bank of England finds itself in an awkward position. Inflation-linked debt costs are surging precisely because inflation remains elevated, yet cutting rates to ease the fiscal burden risks stoking the very inflation that’s driving those costs higher.

That said, higher government borrowing can also lead to higher gilt yields, which makes traditional fixed-income assets more attractive relative to speculative ones. If the UK has to offer juicier returns to attract bond buyers, that could pull capital away from risk assets, crypto included.