Data released by the Office for National Statistics (ONS) revealed a shortfall between government income and spending of £16.4 billion in March 2025, which was £2.8bn higher than the same month last year and surpassed economists’ expectations of £16bn.

For the complete fiscal year ending in March, borrowing totalled £151.9bn. This figure significantly overshot the £137.3bn forecast made by the Office for Budget Responsibility (OBR), the UK government’s fiscal watchdog, in its Spring Statement, representing a £14.6bn difference.

The OBR had previously highlighted the limited budgetary room for manoeuvre, estimating the government’s “fiscal headroom” against its own rules at a historically low £9.9bn even before accounting for recent developments.

The fiscal situation is further strained by a deteriorating economic forecast and the impact of US trade tariffs, including broad 10% duties and higher levies on specific goods like steel and cars. These tariffs are expected to hinder UK growth by reducing access to a major export market and contributing to global economic weakness. Reflecting these concerns, the International Monetary Fund (IMF) recently downgraded its 2025 growth forecast for the UK from 1.6% to 1.1%, warning of disruption from trade tensions. The IMF also reduced its global growth forecast to 2.8%.

Analysts, such as the EY ITEM Club’s chief economic advisor Matt Swannell, note that the combination of tariff impacts, a weaker global economy, and lingering uncertainty will likely consume most of the Chancellor’s narrow fiscal headroom.

Mr Swannell described the end-of-year figures as “difficult reading” and stated that US tariffs make the “UK fiscal arithmetic more challenging”. He also pointed to the rising cost of servicing government debt due to increased bond yields since the Spring Statement.

Mr Swannell added: “A fiscal re-think across the upcoming Spending Review and Autumn Budget looks increasingly likely.

“Even before recent tariff announcements, we viewed the Spring Statement as a stop gap that left a lot of the big fiscal questions unanswered.

“At its next fiscal event in the autumn, the government will likely have to raise taxes or bend its fiscal rules if it wishes to increase defence spending further or help some departments that face very challenging budgets.”