LONDON — UK borrowing fell more than expected in December 2025, easing immediate pressure on Chancellor of the Exchequer Rachel Reeves as she tries to keep a tight grip on the public finances, official figures showed Thursday, Jan. 22, 2026. The improvement was driven largely by stronger receipts, but the bigger picture remains stubborn: debt is high, interest costs are volatile and spending pressures have not gone away.
UK borrowing comes in below forecasts
The public sector borrowed £11.6 billion in December, down £7.1 billion from the same month a year earlier, according to the Office for National Statistics’ public sector finances release. The figure was also below the roughly £13 billion economists had been expecting, giving Reeves an upbeat data point at the start of 2026.
Key details underline why the release mattered politically:
The current budget deficit — day-to-day borrowing — was £5.8 billion in December, down sharply from a year earlier.
Central government debt interest payable was £9.1 billion for the month, showing how interest costs can swallow up fiscal space.
Public sector net debt stood at 95.5% of gross domestic product at the end of December, a level last seen in the early 1960s.
For Reeves, UK borrowing that is running below near-term forecasts can help protect her “headroom” against fiscal rules that aim to stabilise debt while getting day-to-day spending covered by revenues.
Why UK borrowing still looks uncomfortable
Despite the better-than-expected December number, UK borrowing across the financial year so far remains elevated. Borrowing from April through December totaled £140.4 billion, only slightly below the same nine-month stretch a year earlier and among the highest April-to-December totals since monthly records began in 1993, the ONS said.
The ONS also cited the Office for Budget Responsibility’s forecast for net borrowing of £138.3 billion in the financial year ending March 2026 — a reminder that January’s tax-heavy inflows are expected to do some of the clean-up in the final quarter.
A Reuters report noted that the latest data offer Reeves some “early new year cheer,” but warned that the path ahead could be derailed by weaker growth, sticky borrowing costs or political pressure to loosen the purse strings.
The Guardian also pointed to debt interest as a continuing constraint, with inflation-linked gilts adding volatility when the Retail Prices Index moves.
The longer arc of UK borrowing: what changed, and what didn’t
Today’s surprise improvement follows a choppier run. In late 2025, Reuters reported that borrowing earlier in the fiscal year was running hotter than official projections — the kind of slippage that can force hurried tax rises or spending trims.
And the debate over whether rules should be tweaked to allow more investment-led borrowing has been simmering for years; the Institute for Fiscal Studies warned in 2024 that loosening fiscal constraints may buy room in the short term but can raise longer-term risks if debt servicing costs jump.
For now, UK borrowing data have handed Reeves a welcome headline. The harder test will be whether the improvement can be repeated without relying on one-off effects — and without leaving her exposed if growth disappoints or rates stay higher for longer.
