According to official figures released on Friday, the UK government achieved a record budget surplus of 15.4 billion pounds ($19.5 billion) in January. However, this fell short of both economists' and officials' expectations, posing a challenge for finance minister Rachel Reeves.
Typically, January sees a budget surplus in the UK due to the payment of annual income tax bills. Despite this surplus, cumulative borrowing for the first 10 months of the financial year reached 118.2 billion pounds, exceeding figures from the previous year by 11.6 billion pounds. This also surpassed the 105.4 billion pounds forecast by the Office for Budget Responsibility in October.
The Office for Budget Responsibility had anticipated a 20.5 billion-pound surplus for January, highlighting a discrepancy with the actual results.
Following the budget announcement last year, Reeves faced constraints with only 9.9 billion pounds in headroom to achieve a balanced budget by the 2029-30 financial year. However, government borrowing costs increased globally, and British business sentiment and growth prospects were weakened by factors including a 40 billion-pound tax increase and trade tariffs imposed by U.S. President Donald Trump.
The Office for National Statistics reported that public sector net debt stood at 95.3% of annual GDP in January, slightly higher than the previous year, reaching levels last observed in the early 1960s. Public sector net financial liabilities, a key metric pursued by Reeves and encompassing illiquid assets, increased to 82.7% of GDP in January, up by 2.0 percentage points compared to the previous year.
($1 = 0.7891 pounds)