UK runs much bigger than expected budget deficit in May

[LONDON] Britain’s government ran a budget deficit of £23.3 billion (S$40 billion) in May, the Office for National Statistics said on Friday (Jun 19), up 30 per cent on a year earlier and above all economists’ expectations in a Reuters poll.

Economists polled by Reuters had a median forecast of £18.5 billion for the month.

In March, before the impact of the US-Iran war was clear, the government’s budget watchdog forecast Britain would run a £115.5 billion deficit in the 2026/27 financial year, equivalent to 3.6 per cent of national income and down from 4.3 per cent in 2025/26.

Since then, the outlook for growth has weakened and borrowing costs have risen.

Last week, Britain offered investors the highest yield since at least 1998 when it sold £9 billion of 15-year debt.

The government is also struggling to finance extra defence spending within existing budget rules and previous promises to other departments, prompting defence minister John Healey to resign in protest last week. REUTERS