Britain’s public finances came under renewed strain in February, with borrowing significantly higher than expected, even before the impact of rising costs linked to the Middle East conflict.
Public sector net borrowing stood at £14.3bn in February, according to data from the Office for National Statistics — well above economists’ forecasts of an £8.5bn deficit.
The ONS said the higher figure was partly due to the timing of government debt interest payments, which contributed to an 18% increase in borrowing compared with February 2025. It also revised January’s surplus upwards to £31.9bn from a previously estimated £30.3bn.
However, the data highlights broader vulnerabilities in the UK’s public finances, which are now facing additional pressure from rising borrowing costs. The escalation of the U.S.-Israeli conflict with Iran has driven up global energy prices, pushing UK government bond yields higher.
Britain’s reliance on imported natural gas and persistently elevated inflation have intensified the selloff in government bonds compared with international peers.
This leaves Finance Minister Rachel Reeves under increasing pressure. Her fiscal plans were already constrained, and she now faces growing calls — both from within the Labour Party and the wider public — to support households facing higher energy bills and fuel costs.
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said the government would face difficult choices ahead. He warned that unless tensions in the Gulf ease quickly and energy prices fall, Reeves may need to make tough decisions in the autumn budget.
Short-dated UK government bonds, or gilts, suffered one of their sharpest selloffs on record on Thursday after some Bank of England officials signalled the possibility of interest rate increases, adding to market volatility already triggered by geopolitical tensions and attacks on energy infrastructure.
