UK public borrowing climbed to £18.3 billion in August 2026, adding more pressure on the government just weeks before the 28 October Budget.
The latest figures from the Office for National Statistics show borrowing was £2.9 billion higher than in August last year, and £3.5 billion above what the Office for Budget Responsibility had forecast. That makes it the second-highest August borrowing figure on record, beaten only by 2020.
Look at the bigger picture, and the story gets more complicated. From April to August, total borrowing reached £77.3 billion, which is £2.2 billion lower than the same period last year. But it’s still £8.1 billion above what the OBR expected.
Why Has UK Borrowing Risen?
Tax income hasn’t dropped off a cliff. Central government receipts came in at £89.8 billion in August. The problem is spending outpaced it, hitting £103.1 billion. So, spending grew faster than income. Costs went up across public services, benefits, and debt interest.
Debt interest alone reached £8.8 billion in August, the highest figure for that month since records began back in 1997. About £2.1 billion of that came from rising values on index-linked gilts, which move in line with the Retail Prices Index. The current budget is feeling the strain too. The public sector current budget deficit hit £51.9 billion between April and August, £4.8 billion above what the OBR had forecast.
Why Does the £8.1bn Gap Matter?
That £8.1 billion gap matters because the Budget lands on 28 October. To be clear, this doesn’t automatically mean tax rises are coming. But it does put real pressure on the public finances. The OBR will release fresh forecasts alongside the Budget, showing how much wiggle room the government has under its own fiscal rules.
For business owners, this is exactly why the October Budget is worth watching. Whatever gets announced, whether it’s new taxes or spending changes, could ripple through to your cash flow, your investment plans, and how you think about the months ahead.
What Does This Mean for UK Businesses?
Try not to get swept up in tax rumours before the Budget happens. Focus on your own numbers instead and make sure you’re ready to adapt once things become clearer.
Take time now to review your cash flow, planned spending, debt repayments, and any major deals you’ve got in the pipeline, backed by accurate bookkeeping so those numbers can be trusted. If your business might need new finance soon, it’s worth stress-testing how higher borrowing costs could hit your monthly repayments.
If your business has ties to public sector work or public funding, pay close attention to the Budget. With less financial headroom than forecast, government spending decisions could directly affect you. Skip this kind of preparation, and you’ll have less time to react if tax rules, funding, or financing conditions shift.
What Should Business Owners Do Now?
The smartest move is to get ahead of it. Look at your cash reserves and any short-term funding needs. Test whether your planned investments still make sense under a few different cost and tax scenarios, ideally as part of proactive tax planning. And make sure your accounts, payroll, and tax records are accurate and up to date, especially for directors.
Lanop can help you review your cash flow, tax planning, and financial forecasts ahead of the Budget, drawing on our wider financial planning services. Having clear numbers in hand makes it much easier to act quickly once the government confirms what’s changing.
With borrowing sitting £8.1 billion above forecast and debt interest still running high, all eyes will be on the 28 October Budget. For UK businesses, it comes down to this: know your numbers, skip the guesswork, and stay ready to respond. Contact Lanop today to book a free consultation and get your business ready ahead of the Budget.
