The UK government's borrowing surpassed official projections, leading to the national debt reaching 100 percent of GDP by the end of August, according to data released by the Office for National Statistics on Friday.
Public sector net borrowing increased by GBP 3.3 billion compared to the same period last year, totaling GBP 13.7 billion in August. This marks the third highest borrowing level for August since 1993.
Borrowing exceeded the Office for Budget Responsibility's (OBR) forecast of GBP 11.2 billion by GBP 2.5 billion. Economists had anticipated a rise to GBP 12.1 billion.
For the financial year up to August, total borrowing also remained above the official estimate. The borrowing figure rose by GBP 0.3 billion from the previous year, reaching GBP 64.1 billion, as opposed to the OBR's forecast of GBP 57.8 billion.
The increase is largely attributed to a rise in central government departmental spending on goods and services, driven by escalating inflation.
Public sector net debt, excluding public sector banks, was estimated at 100.0 percent of the gross domestic product at the end of August. This represents an increase of 4.3 percentage points from the same time last year.
While this data underscores the challenging fiscal landscape the Chancellor faces ahead of the upcoming Budget on October 30, Capital Economics' economist Alex Kerr suggests there may be some positive aspects.
Kerr highlighted that improvements in the economic backdrop since March, coupled with the extension of the five-year fiscal rule, could provide the Chancellor with more fiscal leeway than previously expected. The OBR may offer up to GBP 22 billion in headroom, compared to the GBP 8.9 billion available at the March Budget.
