UK government borrowing rose more than expected to £18.3bn in August, £3.5bn above the Office for Budget Responsibility forecast, driven by rising interest payments and higher inflation. The Office for National Statistics data adds pressure on chancellor John Healey ahead of the October 28 Budget. Public sector net debt reached £2.985tn (93.8% of GDP), while central government debt interest hit £8.8bn — the highest August figure since 1997.

UK 10-year yields stood at 5.23%, the highest in the G7. Economists warn higher payments have slashed fiscal headroom from nearly £24bn in March, likely forcing tax rises. Ruth Gregory of Capital Economics called the figures a "dismal picture," predicting many policy ambitions will be delayed.

Thomas Pugh of RSM UK said further tax rises seem inevitable. Emma Reynolds, chief secretary to the Treasury, emphasized meeting fiscal rules, while Conservative shadow chancellor Andrew Griffith accused Labour of losing control of public finances.