Economists warn of a fragile outlook as spending outpaces revenue and global risks grow

The UK Government borrowed £24.3 billion in April, setting a concerning tone for the new financial year as fiscal strain continues to intensify.

Government spending is rising at a relentless pace while tax revenues are failing to keep up. Health and welfare costs are climbing, and weaker economic growth is limiting the Treasury’s ability to generate the revenues it needs.

Joe Nellis, economic adviser at accountancy and advisory firm MHA, with a base in Birmingham, said: “What is particularly worrying is that these pressures are emerging at a time when the global economic environment is becoming more unstable again.”

The persistently high cost of servicing the nation’s debt is adding further pressure. Political uncertainty is also unsettling business confidence and financial markets, with fears that a change of leadership could produce a government less committed to existing fiscal rules pushing bond yields higher.

Geopolitical risks add to the pressure

Ongoing tensions in the Middle East are creating fresh risks for government finances. Rising oil and gas prices are feeding into inflation, increasing costs for businesses and households alike, while higher inflation pushes up the cost of servicing inflation-linked government debt.

Nellis cautioned that while the situation does not point to an immediate crisis, the outlook remains fragile. “The UK economy is entering a more fragile phase, in which economic weakness, geopolitical instability and political uncertainty are beginning to feed into each other,” he said.

Slower economic activity also risks weakening tax receipts, adding to concerns that the UK’s fiscal position is becoming increasingly stretched at a difficult moment for the global economy.