UK Government Borrowing Hits Post-Pandemic Low at 4.3% of GDP: March 2026 Update

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Source: Dukascopy Bank SA
The UK's financial report card for the year ending March 2026 shows a government that is successfully narrowing its annual deficit but remains tethered to a massive historical debt. Total borrowing for the year reached £132.0 billion, a significant £19.8 billion decrease from the previous year and slightly better than the official forecasts. This brought the annual deficit down to 4.3% of GDP, the lowest ratio since the pre-pandemic era. This improvement was largely fueled by a £87.2 billion surge in receipts, driven by healthy Income Tax and VAT returns, alongside the impact of the April 2025 National Insurance rate changes.



However, these gains were partially offset by the rising costs of running the country. Departmental spending and social benefits, including inflation-linked state pensions, rose by nearly £49 billion. While a dip in the Retail Prices Index provided some temporary relief by lowering interest payments on index-linked gilts in March, the total national debt remains stubbornly high at 93.8% of GDP. Essentially, while the government is adding to its overdraft at a slower pace than last year, the total balance owed remains at levels not seen since the early 1960s, keeping the pressure on the government to meet its 2030 target of a balanced current budget.
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