UK public sector finances showed signs of continued strain in May 2025, with borrowing reaching £17.7 billion, up £0.7 billion from a year earlier, making it the second-highest May figure since records began in 1993, only behind the pandemic-era peak in 2020. Over the first five months of the financial year, total borrowing rose to £37.7 billion, again placing 2025 among the highest on record.

However, there were glimmers of improvement. The current budget deficit, which excludes investment spending, narrowed slightly to £12.8 billion in May, down £1.7 billion year-over-year. Still, this figure remains the fourth-highest May deficit since 1997, underscoring ongoing fiscal pressures.

Public sector net debt rose to 96.4 percent of GDP, climbing by 0.5 percentage points in a year and approaching levels last seen in the early 1960s. Meanwhile, net financial liabilities stood at 83.9 percent of GDP, significantly below net debt but still elevated, signalling long-term fiscal challenges.

Despite a slight drop in the central government net cash requirement (£24.1 billion), the broader picture points to persistent imbalances between revenue and spending, highlighting the UK's challenging path toward fiscal sustainability amid weak growth and high debt burdens.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.