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(Bloomberg) — UK government borrowing hit the highest April level in six years, as pressure on the public finances mounts from the Iran war and political instability at home.
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The deficit totalled £24.3 billion ($32.6 billion) last month, the first of the new fiscal year, overshooting the £20.9 billion forecast by the Office for Budget Responsibility in March. It was £4.9 billion higher than in April last year.
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The figures are unwelcome for Chancellor of the Exchequer Rachel Reeves, with the public finances yet to feel the full effect of the Middle East energy shock. A fight over the future of Britain’s Labour government is adding to the potential pressures.
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The Iran war is piling pressure on Reeves to push out support for households and businesses impacted by the surge in fuel costs. And higher inflation and gilt yields will add to debt-servicing costs already totalling around £110 billion a year.
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Tax revenues meanwhile may be hit by a weaker economy with forecasters cutting their 2026 growth projections for the UK.
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Also hanging over the outlook is uncertainty over future UK economic policy after heavy losses for the ruling Labour Party in local elections left Keir Starmer facing a potential challenge to his premiership.
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Investors fear that a new prime minister would take a more left-wing stance that led to looser fiscal policy and an increase to already-elevated gilt issuance.
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The worries have helped to lift government borrowing costs. The benchmark 10-year gilt yield hit its highest level since 2008 last week while the yield on the 30-year note has jumped to levels last seen in the late 1990s.
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