A sharp rise in UK government borrowing has intensified concerns that ministers will have limited capacity to shield households from a looming surge in energy bills, as geopolitical tensions push inflation risks higher.
Official figures show public sector net borrowing reached £14.3 billion in February, the second-highest level for the month since records began and significantly above economists’ expectations of £8.8 billion. The figure was also £2.2 billion higher than the same period last year, underlining mounting fiscal pressure even before the escalation of conflict in the Middle East.
The data, released by the Office for National Statistics, reflects a widening gap between government spending and tax income. While receipts increased, they were outweighed by higher expenditure and the timing of debt interest payments, highlighting the growing burden of servicing the UK’s national debt.
The deterioration in the public finances comes at a critical moment. Since the outbreak of the US-Israel conflict with Iran, global energy markets have been thrown into volatility, pushing up oil and gas prices and raising fears of a renewed inflationary shock.
Economists warn that this combination of higher borrowing and rising debt costs significantly constrains the government’s ability to repeat the kind of large-scale energy support packages deployed during the 2022 cost-of-living crisis.
Ruth Gregory, deputy chief UK economist at Capital Economics, said there was little room for manoeuvre. “We doubt there is scope for a large-scale fiscal support package like that seen in 2022, even in more extreme scenarios,” she said, adding that any assistance offered would likely be more limited due to the UK’s “worse fiscal position”.
That view was echoed by Charlie Bean, former deputy governor of the Bank of England, who said the government no longer has the same financial flexibility it enjoyed during previous energy shocks.
Financial markets have already begun to react. Government borrowing costs have risen sharply in recent weeks as investors factor in the prospect of higher inflation driven by surging energy prices. This has increased the cost of servicing the UK’s debt pile, with around one in every ten pounds of public spending now going towards interest payments.
Danni Hewson, head of financial analysis at AJ Bell, said the latest borrowing figures would make uncomfortable reading for the Treasury. “With the chancellor under pressure to act swiftly to protect households from the impact of the latest energy price shock, today’s numbers won’t make great reading,” she said.
The scale of the challenge is compounded by forecasts that household energy bills could rise by more than £300 from July, according to consultancy Cornwall Insight, although the final figure remains subject to market movements.
While borrowing over the broader financial year remains lower than previously forecast, the February spike highlights the volatility in the UK’s fiscal position. Analysts noted that part of the increase reflects technical factors, including the timing of debt interest payments, but the underlying trend remains concerning.
Lindsay James, investment strategist at Quilter, said hopes that the government was regaining control of the public finances had been short-lived. “There were glimmers of hope that borrowing was being reined in after January’s record surplus, but the latest data has put a swift end to that picture,” she said.
The UK’s debt burden remains elevated at 93.1 per cent of GDP, close to levels last seen in the early 1960s, limiting the government’s ability to deploy further fiscal stimulus without risking market confidence.
Chief Secretary to the Treasury James Murray insisted the government had the “right economic plan” and was prepared for a more volatile global environment. However, political pressure is mounting, with critics arguing that rising borrowing and debt costs are narrowing the policy options available.
For households and businesses already grappling with high living costs, the message is increasingly clear: any government intervention to offset rising energy bills is likely to be more targeted, more modest, and far less generous than in previous crises.
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Surge in UK borrowing limits scope for energy bill support as fiscal pressures mount