Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.New data on government borrowing, and retail sales, are giving us a new insight into the state of the British economy today.On the fiscal side, UK government borrowing hit its second-highest level for any May last month, as spending continued to outstrip tax receipts.The UK borrowed £17.7bn in May to balance the books, £0.

7bn more than in May 2024, the Office for National Statistics has reported.That’s only exceeded by May 2020, when the Covid-19 pandemic was gripping the country.ONS deputy director for public sector finances Rob Doody explains:“Last month saw the public sector borrow £0.7 billion more than at the same time last year, with only 2020, affected as it was by COVID-19, seeing higher May borrowing in the time since monthly records began.“While receipts were up, thanks partly to higher income tax revenue and National Insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits.

”Public sector net borrowing excluding public sector banks was £17.7 billion in May 2025.This was £0.7 billion more than in May 2024 and the second-highest May borrowing since monthly records began in 1993.➡️ https://t.

co/I4cI5aiUZ4 pic.twitter.com/LxKyTrmoh6The report shows that central government tax receipts increased by £3.5bn to £61.7bn in May, swelled by higher income from tax – including £1.

9bn more on income tax, £800m in Value Added Tax, and £600m in corporation tax,The recent increase in employers’ national insurance rates helped to lift compulsory social contributions by £1,8bn to £15,1bn,But, central government spending rose by £4.

1bn, including:A £2.8bn rise in central government departmental spending on goods and services, as pay rises and inflation increased running costsA £2bn rise in net social benefits paid by central government to £27.1 billion, largely caused by inflation-linked increases in many benefits and earnings-linked increases to state pension paymentsMay’s borrowing leaves the UK’s net debt-to-GDP ratio at the end of May 2025 at 96.4%, 0.5 percentage points more than a year ago, and around the highest level since the 1960s.

7am BST: UK retail sales report for May7am BST: UK public finances report for May9am BST: European Central Bank economic bulletin1.30pm BST: Philadelphia Fed manufacturing index3pm BST: EU consumer confidence reportThomas Pugh, economist at audit, tax and consulting firm RSM UK also predicts tax rises in the autumn budget.Having analysed today’s public finances, Pugh explains:“Public sector net borrowing was £17.7bn in May, £0.7bn higher than in May last year and £0.

6bn more than the OBR forecast.The good news is that cumulative borrowing for the first two months of the fiscal year is £2.9bn lower than the OBR forecast in March, which will give the chancellor something to cheer.“On the details, government spending came in at £99bn, slightly below the OBR forecast due to a smaller increase in debt payments.Tax receipts were £82.

5bn, also slightly below forecast, but there were signs the increase in employment taxes is feeding through into higher receipts as national insurance receipts exceeded the forecast,Crucially, the current budget deficit, which is now what matters for the fiscal rules, came in £0,2bn below the OBR forecast,Tighter fiscal policy could encourage the Bank of England to lower interest rates, after leaving borrowing costs unchanged yesterday Pugh adds:“Looking ahead to the budget in the autumn, the under performance of the economy and higher borrowing costs mean the chancellor may already have lost the £9,9bn of fiscal headroom that she clawed back in March.

Throw in the tough outlook for many government departments announced in the spending review and u-turns on welfare spending and the chancellor will probably have to announce some top-up tax increases after the summer.“We are pencilling in tax increases of £10-£20bn.The good news is that with interest rates likely to be around 4% at the time of the budget there is plenty of scope for the Bank of England to cut rates to offset the impact of any fiscal consolidation on the economy.”Despite UK government borrowing slightly undershooting forecasts so far this financial year, tax rises in the autumn are likely.That’s the view of City consultancy Capital Economics, who told clients this morning:Despite the overshoot in May, public borrowing was £2.

9bn below the OBR’s forecast in the first two months of the fiscal year,That said, the OBR may still revise up its borrowing forecasts from March in the Autumn Budget,That and already-tight spending plans mean tax hikes later this year appear increasingly likely,Last week, ther was a flurry of predictions of tax rises after chancellor Rachel Reeves outlines the government’s spending plans for the next few years,Capital Economics predict the OBR could revise up its debt interest payments and borrowing forecasts in the Autumn Budget, given recent increases in borrowing costs, while the cooling in the labour market means income tax receipts are unlikely to keep exceeding expectations.

They add:We doubt it will get much better for the Chancellor anytime soon, as her £9.9bn buffer against her fiscal mandate may be wiped out at the Autumn Budget.The u-turns on benefit and welfare spending, downward revisions to the OBR’s productivity forecasts and higher borrowing costs may mean to maintain her current £9.9bn buffer, Reeves has to raise £13-23bn later this year.And with the gilt market sensitive to significant increases in borrowing, all this means tax rises are looking increasingly likely.

Retail analyst Nick Bubb isn’t convinced by today’s retail sales figures, showing a 5% drop in food sales volumes last month.He explains:Well, it’s a brave man (or woman) who believes ONS Retail Sales figures...but their Food sales figures for May look much too gloomy, given that the BRC-KPMG survey said that Food sales were up 3.

6% in May...We’re now two months into the financial year, and UK government borrowing is slightly lower than the fiscal watchog had forecast.According to the Office for National Statistics, the UK has borrowed £37.

7bn in April and May.That’s £1.6bn more than in the same period in 2024, but £2.9bn less than the £40.7bn forecast by the Office for Budget Responsibility (OBR).

Today’s public finances report shows that the UK spent £7,6bn paying the interest on government debt in May,That’s the second-highest May interest payable since monthly records began in 1997, but actually £700m lower than a year ago,That fall is thanks to the drop in inflation year-on-year, which lowered the cost of servicing index-linked bonds,Ouch.

British retail sales volumes dropped at their fastest rate since December 2023 last month, the Office for National Statistics reports.The latest retail sales report shows that volumes fell by 2.7% month-on-month in May, and were 1.3% lower than a year ago.That’s a worrying sign that consumer demand may have weakened last month.

The decline was, apparently, driven by a drop in food store sales volumes, after a strong rise in April.Food store sales volumes fell back in May, following strong sales in April.Feedback suggested reduced purchases for alcohol and tobacco with customers choosing to make cutbacks.Clothing and household goods stores reported slow trading due to reduced footfall.pic.

twitter.com/g5aIdbNOrNONS senior statistician Hannah Finselbach says:“Retail sales fell sharply in May with their largest monthly fall since the end of 2023.“This was mainly due to a dismal month for food retailers, especially supermarkets, following strong sales in April.Feedback suggested reduced purchases for alcohol and tobacco with customers choosing to make cutbacks.“The falls were consistent across all sectors with clothing and household goods stores reporting slow trading due to reduced footfall.

There was also decreased demand for DIY items as consumers took advantage of the good weather over the previous few months,“Looking at the wider picture, retail sales are still up across the latest three-months as a whole,”Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy,New data on government borrowing, and retail sales, are giving us a new insight into the state of the British economy today,On the fiscal side, UK government borrowing hit its second-highest level for any May last month, as spending continued to outstrip tax receipts.

The UK borrowed £17.7bn in May to balance the books, £0.7bn more than in May 2024, the Office for National Statistics has reported.That’s only exceeded by May 2020, when the Covid-19 pandemic was gripping the country.ONS deputy director for public sector finances Rob Doody explains:“Last month saw the public sector borrow £0.

7 billion more than at the same time last year, with only 2020, affected as it was by COVID-19, seeing higher May borrowing in the time since monthly records began,“While receipts were up, thanks partly to higher income tax revenue and National Insurance contributions, spending was up more, affected by increased running costs and inflation-linked uplifts to many benefits,”Public sector net borrowing excluding public sector banks was £17,7 billion in May 2025,This was £0.

7 billion more than in May 2024 and the second-highest May borrowing since monthly records began in 1993.➡️ https://t.co/I4cI5aiUZ4 pic.twitter.com/LxKyTrmoh6The report shows that central government tax receipts increased by £3.

5bn to £61.7bn in May, swelled by higher income from tax – including £1.9bn more on income tax, £800m in Value Added Tax, and £600m in corporation tax.The recent increase in employers’ national insurance rates helped to lift compulsory social contributions by £1.8bn to £15