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The UK authorities suffered a double financial blow on Wednesday as annual public borrowing got here in nearly £15bn greater than anticipated and personal sector exercise contracted on the quickest tempo in additional than two years.

The borrowing figures put strain on chancellor Rachel Reeves to boost taxes in her autumn Funds to steadiness the books simply as Wednesday’s PMI information, a measure of the well being of the personal sector, confirmed that companies are struggling.

The shortfall between authorities earnings and spending was £151.9bn within the 12 months to March, the Workplace for Nationwide Statistics stated, an overshoot of greater than 10 per cent on the £137.3bn forecast only a month in the past by the Workplace for Funds Accountability, the federal government’s fiscal watchdog.

It was additionally £20.7bn greater than in the identical 12-month interval a 12 months earlier and the third-highest stage of borrowing on report for a full fiscal 12 months.

“This raises the chances that if the chancellor wishes to stick to her fiscal rules, more tax hikes in the autumn Budget will be required,” stated Ruth Gregory on the consultancy Capital Economics.

In the meantime, the S&P World flash UK PMI composite output index fell to a 29-month low of 48.2 in April from 51.5 the earlier month, in line with new information printed on Wednesday.

This was decrease than the 50.4 forecast by economists polled by Reuters and under the 50 threshold, indicating a contraction.

Chris Williamson, chief enterprise economist at S&P World Market Intelligence, stated: “While recent months have been characterised by UK businesses treading water, broadly stagnating since last autumn’s Budget, businesses are reporting more of a struggle to keep their heads above water in April.”

Reeves, who elevated taxes paid by employers in final autumn’s Funds, has a self-imposed rule that day-to-day spending have to be coated by revenues by 2029-30.

Public sector borrowing for the month of March was £16.4bn, marginally above the £16bn anticipated.

However Wednesday’s figures additionally confirmed that the UK’s present funds deficit, which displays borrowing to fund day-to-day public sector actions, was £74.6bn for the final fiscal 12 months, £13.9bn greater than the OBR forecast final month in the past.

ONS chief economist Grant Fitzner stated the rise in public sector borrowing seemed to be “largely due to inflation-related costs, including higher pay and benefit increases” and had come regardless of a “substantial” enhance in earnings.

The UK’s borrowing prices and deteriorating financial prospects have put additional strain on the nation’s public funds. The OBR warned final month that, regardless of current welfare cuts, the federal government’s “fiscal headroom” — or budgetary room for manoeuvre — remained traditionally small at £9.9bn.

US President Donald Trump’s tariffs additionally goal Britain, together with many different international locations, with 10 per cent across-the-board duties and better ranges on metal and vehicles.

Mel Stride, shadow chancellor, accused Reeves of “fiddling the fiscal rules” and rising borrowing by £30bn a 12 months.

‘’These eye-watering sums are being paid for by hardworking folks by means of greater taxes, greater costs and better mortgage charges.’’

Darren Jones, chief secretary to the Treasury, stated the federal government was “going through every penny of taxpayer money spent, line by line, for the first time in 17 years to tear out waste”.

The figures come as Reeves is because of attend the annual conferences of the IMF and World Financial institution in Washington.

On Tuesday, the IMF lower its 2025 development forecast for the UK to 1.1 per cent, down from its earlier estimate of 1.6 per cent, warning of widespread financial disruption from commerce tensions.

The ONS stated that public sector spending within the 12 months to March had risen £56.8bn from the earlier fiscal 12 months, with greater spending on public companies, advantages and debt.

Curiosity payable on central authorities debt elevated by £2.1bn to £85bn, largely as a result of the curiosity payable on index-linked gilts rises and falls with the Retail Value Index.

Public sector receipts have been up by £36bn, with development in central authorities tax receipts partially offset by reductions in nationwide insurance coverage contributions.

The UK’s Debt Administration Workplace stated on Wednesday that it deliberate to extend its debt gross sales for 2025-26 by £5bn, in contrast with what it specified by Reeves’ Spring Assertion, taking the entire internet financing requirement to £309bn.

After a surge in long-term borrowing prices, and requires the DMO to reduce its long-term debt issuance, it stated it will fund the additional by means of a rise to short-term Treasury payments, and likewise diminished the proportion of long-term gilts that it plans to promote.

Lengthy-term debt rallied, pushing the 30-year UK gilt yield — which hit its highest since 1998 earlier this month — down 0.09 share factors to five.27 per cent.

Extra reporting by George Parker and Ian Smith in London