Pound falls and bond yields rise after UK borrowing soars
This morning’s UK public finances are going down badly in the City.
The pound has dropped by half a cent this morning, to $1.35. That puts sterling on track for its third daily fall in a row, as it drops back from Tuesday’s two-month high.
Government bonds are under pressure too, as traders react to the news that borrowing is £11bn higher than forecast so far this year.
The yield, or interest rate, on 10-year UK gilts (bonds) is up 4 basis points at 4.7% (up from 4.66% last night).
30-year gilt yields have also risen by 4bps, to 5.54%.
Kathleen Brooks, research director at XTB, says today’s public finance data puts the sustainability of borrowing and the size of UK state into question:
The pound has sunk on this data, and is testing support at $1.3500, it is the second worst performing currency in the G10 FX space today, and is lower by 0.33% vs. the USD. The UK’s bond market is extremely fragile, 10-year and 30-year yields rose sharply on Thursday, although global long end yields were higher, the UK was the weakest performer across Europe and the US.
UK bond yields could rise further on this news, especially as the Bank of England is maintaining its ‘careful and gradual’ approach to loosening monetary policy. Although the BOE has reduced the amount of bonds that it is offloading from its balance sheet, especially long end bonds, they are still shrinking their balance sheet albeit at a slower pace. Thus, the BOE cannot be relied on to relieve pressure on the long end of the Uk Gilt curve.
Key events
Simon French, chief economist at UK investment bank Panmure Liberum, highlights how the UK’s borrowing situation has deteriorated since last summer’s election:
The deterioration in both the total UK borrowing requirement (£162bn; 12m rolling) and current budget deficit (£86bn) is pretty stark since last year’s General Election. Borrowing to fund investment – as the fiscal rules changes of October 2024 provided air cover to do – is more… pic.twitter.com/YbRjTM53iy
— Simon French (@Frencheconomics) September 19, 2025
Insolvencies rise, amid record number of debt relief orders
The number of people entering insolvency in England and Wales has jumped, suggesting more households are struggling.
In August 2025, 11,348 individuals entered insolvency in England and Wales, new data from the Insolvency Service shows. This is 7% higher than in July 2025 and 16% higher than a year ago.
This included 622 bankruptcies, 4,239 debt relief orders (DROs) and 6,487 individual voluntary arrangements (IVAs).
That’s the highest number of monthly DROs since they were introduced in 2009.
Debt relief orders (DROs) were introduced in England in Wales in 2009 as a low-cost alternative to bankruptcy for people struggling with debts. They let people freeze their debts for a year then write it off completely if their finances haven’t changed.
The Office for Budget Responsibility, Britain’s fiscal watchdog, has confirmed that UK borrowing this financial year is £11.4bn above its forecasts.
In its latest commentary on the UK public sector finances, the OBR explains:
The overshoot in this month’s estimates compared to our March forecast profile is primarily due to revisions which have increased estimated borrowing by local authorities so far this year. In addition, VAT and other receipts were lower-thanexpected in the month of August.
Nvidia to invest £2bn in UK tech firms
Robert Booth
US technology giant Nvidia has pledged to invest £2bn investment in UK tech companies.
Nvidia founder and chief executive Jensen Huang announced the investment last night at a packed event attended by hundreds of venture capitalists and entrepreneurs in London’s King’s Cross, our UK technology editor Rob Booth reports.
He was joined on stage by the prime minister Keir Starmer as he announced a list of UK companies in which Nvidia would invest. One by one, Huang called out the names of AI firms including the driverless car start-up Wayve, Basecamp Research, which is involved in life sciences, video platform Synthesia and finance app Revolut and yelled: “I’m going to invest in your next round”
Huang also gave Starmer a gift, a DGX1 which he described as the world’s first AI supercomputer. It was inscribed with the message: “Prime Minister Starmer, this is the age of AI. A new industrial revolution begins”.
Huang ended his presentation, which included appearances by the UK secretaries of state for business and science and technology, Peter Kyle and Liz Kendall, and the US commerce secretary Howard Luttnick, saying to the audience of tech firms: “I love you guys, I’m looking forward to making a fortune off of all of you”.
In a sign of rising pressure on Downing Street not to implement tough AI regulations that would affect US investors and tech firms, the US commerce secretary Howard Luttnick, said “we need standards not safety”.
Addressing the UK business secretary Peter Kyle, Luttnick said:
”In order to win the race to AGI we must arm our best entrepreneurs, our best innovators, our best engineers….It’s key that you deliver the regulatory infrastructure framework so that the smartest people here feel good about that investment.”
Nvidia’s investment pledge came just hours after it announced plans to invest $5bn in Intel.
It also comes alongside a multibillion-dollar transatlantic tech agreement announced as Donald Trump arrived in the UK – here’s our breakdown on what was announced, and what is new:
Retail sales rise in Great Britain as warm weather boosts clothing purchases
Mark Sweney
In better economic news, retail sales rose last month, thanks to back-to-school shopping and warm weather.
Total retail sales in Great Britain rose 0.5%, the Office for National Statistics (ONS) said, as parents prepared for the new school year and shoppers enjoyed a series of heatwave and the summer’s last bank holiday.
The figure was slightly higher than the 0.4% increase that some analysts had forecast.
The ONS, which revised its estimate for July’s monthly sales growth down from 0.6% to 0.5%, also said that non-store retailing, primarily online shopping, increased in August.
Clothing sales rose 1.3% month on month in August, boosted by the warm conditions, while there was a 1.1% monthly increase in non-food stores sales – the total of department stores, household and other non-food stores.
More here:
Saxo: “sterling gets the treatment as government borrowing gets out of control”
Today’s borrowing figures – showing a huge jump ahead of official forecasts – lays bare the challenge facing the UK, warns Neil Wilson, UK investor strategist at Saxo Markets.
He adds:
Sterling is rightly getting the treatment because the borrowing is a) too high, b) unsustainable, c) out of control and d) never going to change.
The pound is indeed continuing to slide – it’s now down two-thirds of a cent, at $1.3483, the lowest in almost two weeks.
August’s jump in borrowing means there are “difficult fiscal decisions” on the horizon for Rachel Reeves to tackle, says the EY ITEM Club.
Matt Swannell, chief economic advisor to the EY ITEM Club, explains:
“In August, the Government borrowed £18bn, the largest August deficit in five years and £5.5bn more than the OBR expected. As the Budget approaches, this leaves the UK finances in a fragile position. So far this fiscal year, the Government has borrowed £83.8bn, outstripping the OBR’s £72.4bn forecast.
“However, the Government’s performance against its primary fiscal rule will be judged by the progress made on the current budget, which accounts for how much it borrows to cover day-to-day spending. In August, the current budget deficit was £13.6bn, up from £9.6bn at the same time last year. Across the fiscal year-to-date, the current budget is in deficit by £62bn, well above the OBR’s March forecast of £46.6bn. The OBR expects a marked reduction in current borrowing in the latter half of this fiscal year, so it looks like it will only become more difficult to carefully manage the day-to-day finances from here.”
“The Government has pledged to only borrow to invest by FY2029-2030, and while the latest data shows it may be starting from a more difficult position than expected at the Spring Statement, greater fiscal challenges loom. A combination of gilt market stress and reversals on welfare reform has used up the thin margin for error in the Government’s current spending plans, meaning taxes will almost certainly need to rise if the fiscal rules are to be met. Even then, the task of getting the public finances back on track could be made much more difficult by a downgrade to the OBR’s very optimistic growth forecasts, leaving a £20bn hole in tax revenue.”
Pound falls and bond yields rise after UK borrowing soars
This morning’s UK public finances are going down badly in the City.
The pound has dropped by half a cent this morning, to $1.35. That puts sterling on track for its third daily fall in a row, as it drops back from Tuesday’s two-month high.
Government bonds are under pressure too, as traders react to the news that borrowing is £11bn higher than forecast so far this year.
The yield, or interest rate, on 10-year UK gilts (bonds) is up 4 basis points at 4.7% (up from 4.66% last night).
30-year gilt yields have also risen by 4bps, to 5.54%.
Kathleen Brooks, research director at XTB, says today’s public finance data puts the sustainability of borrowing and the size of UK state into question:
The pound has sunk on this data, and is testing support at $1.3500, it is the second worst performing currency in the G10 FX space today, and is lower by 0.33% vs. the USD. The UK’s bond market is extremely fragile, 10-year and 30-year yields rose sharply on Thursday, although global long end yields were higher, the UK was the weakest performer across Europe and the US.
UK bond yields could rise further on this news, especially as the Bank of England is maintaining its ‘careful and gradual’ approach to loosening monetary policy. Although the BOE has reduced the amount of bonds that it is offloading from its balance sheet, especially long end bonds, they are still shrinking their balance sheet albeit at a slower pace. Thus, the BOE cannot be relied on to relieve pressure on the long end of the Uk Gilt curve.
The UK public finances are continuing to deteriorate despite the economy not being terribly weak, says Paul Dales, chief UK economist at Capital Economics.
And that means the chancellor will have to raise around £28bn in the Budget on 26 November, mostly through higher taxes, Dales adds, as borrowing so far this year is running above forecast.
He explains:
Public net sector borrowing of £18.0bn in August (consensus £12.8bn, OBR £12.5bn) means that after five months of the financial year borrowing is already £11.4bn higher than the OBR forecast at the Spring Statement in March.
The overshoot in the Chancellor’s chosen fiscal mandate of the current budget is even greater at £15.4bn (the current budget deficit was £13.6bn in August versus the OBR forecast of £9.5bn). Of course, what matter’s is what the OBR forecasts the current budget to be in 2029/30, which is when the Chancellor’s fiscal mandate bites.
Our current estimate is that it will forecast a deficit of about £18bn, meaning the Chancellor will have to raise £28bn (see here), mostly through higher taxes (see here), if she wants to keep her buffer against her rule of £10bn.
Mel Stride, the shadow chancellor, has accused Rachel Reeves of losing control of the public finances, following the jump in borrowing in August:
“Keir Starmer and Rachel Reeves are too weak and distracted to take the action needed to reduce the deficit. The chancellor has lost control of the public finances, and Labour’s weakness means much needed welfare reforms have been abandoned.”
James Murray, chief secretary to the Treasury, has responded to today’s UK public finance:
“This Government has a plan to bring down borrowing because taxpayer money should be spent on the country’s priorities, not on debt interest.
Our focus is on economic stability, fiscal responsibility, ripping up needless red tape, tearing out waste from our public services, driving forward reforms, and putting more money in working people’s pockets.”
Interest bill on government debt rises again
Once again, Britain spend billions of pounds servicing its growing national debt (and thus adding to it!).
The interest bill on central government debt rose to £8.4bn in August, £1.9bn more than in August 2024, and £900m more than in July.
This increase was driven by higher inflation, which added to the cost of index-linked government bonds.
So far this financial year, the interest payable on central government debt has increased by £10.6bn to £49.9bn, largely because the interest payable on index-linked gilts rises and falls with the Retail Prices Index (RPI) of inflation.
Borrowing so far this year is £11.4bn over forecast
Worryingly for Rachel Reeves, government borrowing so far this financial year is running ahead of the Office for Budget Responsibility’s forecasts.
From April to August, borrowing now totals £83.8bn, £16.2bn more than in the same five-month period of 2024.
That’s the second-highest April to August borrowing since monthly records began in 1993, beaten only by 2020 when Covid-19 drove up spending and hammered tax receipts.
It’s also £11.4bn more than the £72.4bn forecast by the Office for Budget Responsibility (OBR) in March.
That indicates that the chancellor could need to take measures to address rising borrowing, to stick within her fiscal rules.
MHA: “UK public sector borrowing jumps again deepening the Chancellor’s worries”
This morning’s jump in UK public sector borrowing will “deepening the Chancellor’s worries, warns Professor Joe Nellis, economic adviser at MHA, the accountancy and advisory firm.
Professor Nellis explains:
UK net public sector borrowing rose significantly in August to £17.96bn, piling extra pressure on the Chancellor as preparations intensify for the Autumn Budget.
The overshoot was driven by persistently high debt interest costs on inflation-linked gilts — 30-year gilts reached their highest in almost 30 years in August. The debt-inflation costs are now projected at over £110 billion in 2025-26. Higher borrowing is also the result of rising welfare spending and higher public sector pay settlements.
As the economy continues to falter, without any consistent and sustained growth, increased government borrowing makes the Chancellor’s fiscal headroom even slimmer ahead of the Budget on 26th November. This simply cannot go on. A government cannot continue to spend beyond its means while espousing belief in ‘fiscal stability,’ without evoking the wrath of the financial markets. The Chancellor has some very difficult, but very important, decisions to make at the Budget if fiscal stability is to be secured.
UK borrowing jumps to £18bn in August
Newsflash: Britain’s government borrowing soared in August, as spending rose faster than tax receipts, adding to the challenges facing Rachel Reeves as she draws up the autumn budget.
Public sector net borrowing excluding public sector banks jumped to £18bn in August 2025. This was £3.5bn more than in August 2024 and the highest August borrowing for five years.
It’s also £5.5bn more than the £12.5bn which the Office for Budget Responsibility (OBR) had predicted the UK would borrow in August.
ONS chief economist Grant Fitzner said:
“Last month’s borrowing was the highest August total since the pandemic.
Although overall tax and National Insurance receipts were noticeably up on last year, these increases were outstripped by higher spending on public services, benefits and debt interest. Total borrowing for the financial year to date was also the highest since 2020.
Introduction: Consumer confidence has fallen back
Good morning, and welcome to our rolling coverage of business, the financial markets and the economy.
UK consumer confidence has weakened, new data today shows, as people grow gloomier about the their personal financial situation and the state of the economy.
With a likely tax-raising budget looming in two months time, GfK’s consumer confidence Index decreased by two points to -19 in September, reversing a rise recorded in August.
All five measures of consumer confidence fell, including how confident people felt about making a major purchase.
Neil Bellamy, consumer insights director at GfK, warned there is an “autumnal chill” in this month’s report, and explains:
The August 7th decrease in interest rates does not appear to have provided any obvious boost to the financial mood of consumers or drawn attention away from day-to-day cost issues. Both personal finance measures – past and future – are lower, while our major purchases measure has dropped three points to -16.
Even more striking is an eight-point fall in saving intentions. Looking at the economy, sentiment is sliding sharply: in June 2024 our forward-looking measure stood at -11, but just 15 months later it has slumped to -32.
Perceptions of the past year remain weak too, down three from last month to -45. With tax rises expected in the November budget, the risk is that confidence inevitably falls, just like the autumn leaves.”
Yesterday, retailer Next warned that the economic outlook was weakening, giving the company “another reason to be cautious”.
