UK net debt passes 100% of GDP for first time since 1961

The United Kingdom’s public sector net debt has surpassed 100% of its GDP in May, a level not seen since 1961, according to the Office for National Statistics (ONS). The rising debt, excluding state-controlled banks, reached £2.567 trillion ($3.28 trillion), representing 100.1% of GDP. Government borrowing in May, though slightly lower than in April, exceeded expectations and remained at a high level, while inflation remained steady, defying predictions of a decline.

Public Sector Net Debt Surpasses 100% of GDP

The ONS has reported that the UK’s public sector net debt, excluding state-controlled banks, reached £2.567 trillion, equivalent to 100.1% of the country’s GDP. This milestone marks the first time since 1961 that the UK has experienced such high levels of debt relative to its economic output.

Government Borrowing Exceeds Expectations

In May, the government borrowed £20.045 billion, as revealed by the ONS, surpassing the consensus expectations of £19.5 billion from a Reuters poll of economists. While this figure represented a £3 billion decrease from April, it remained more than double the borrowing level from May 2022. It also stood as the second-highest borrowing recorded for the month of May since records began. PwC Economist Divya Sridhar pointed out that this substantial borrowing could lead to increased spending due to higher debt interest payments and inflation-linked benefits and tax credits.

Steady Inflation Adds Pressure

Contrary to economic expectations of a slight decline, the UK’s annual inflation rate remained unchanged in May compared to the previous month, as announced by the ONS. This outcome has added further pressure on both the government and consumers. The steady inflation rate is anticipated to contribute to increased spending, driven by higher debt interest payments and the adjustment of inflation-linked benefits and tax credits.

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