Government financial liabilities remain elevated at more than four-fifths of national output, with debt servicing costs nearly tripling since 2019.
The UK’s public sector net financial liabilities reached 82.5% of gross domestic product at the end of February 2026, according to provisional estimates released by the Office for National Statistics. The figures show government debt obligations equivalent to more than four-fifths of the country’s entire annual economic output.
These liabilities stood 10.6 percentage points below the headline measure of public sector net debt, which includes a narrower range of government financial obligations. The ONS data reveals the gap between different measures of government indebtedness as ministers grapple with fiscal pressures.
The Scale of Government Borrowing
Public sector net debt excluding public sector banks was provisionally estimated at 92.9% of GDP at the end of January 2026 — unchanged from 12 months earlier. But the cost of servicing this debt has surged sharply.
Government debt servicing costs jumped from £39 billion in 2019-20 to £106 billion in 2024-25, according to Office for Budget Responsibility figures. That represents an increase from 1.7% to 3.6% of GDP over five years.
The rise reflects higher interest rates and increased borrowing following the pandemic and cost-of-living crisis. UK government 10-year bond yields are currently the highest in the G7 and fourth-highest among advanced economies, the OBR confirms.
Government Targets Under Pressure
Ministers legislated new fiscal targets in the Autumn Budget 2024, focusing on both the current budget deficit and net financial liabilities. The government aims to bring the current budget into surplus by the financial year ending 2030 and for liabilities to fall relative to GDP year-on-year.
Yet the public sector current budget deficit was £76.7 billion in the financial year ending March 2025 — an increase of £10.2 billion from the previous year. The deficit represents the gap between day-to-day spending and revenues, excluding investment.
Office for Budget Responsibility forecasts suggest debt will continue rising in the near term. Net debt is projected to climb from 94.5% of GDP in 2025-26 to 96.5% in 2028-29 before falling to 95% by 2030-31.
Financial liabilities are expected to peak at just under 83% of GDP in 2027-28 before declining to 81% by the end of the forecast period.
Economic Pressures Mount
The debt trajectory depends heavily on economic growth, inflation and interest rates. Higher borrowing costs mean more tax revenue goes toward servicing existing debt rather than funding public services or investment.
Debt-to-GDP ratios are at levels last seen in the early 1960s, when the UK was still paying off Second World War borrowing. The current fiscal position reflects spending during the 2008 financial crisis, Covid-19 pandemic, and energy bill support schemes.
Source: @ONS
Key Takeaways
- Public sector net financial liabilities reached 82.5% of GDP in February 2026, down 10.6 percentage points from headline debt measures
- Government debt servicing costs nearly tripled from £39 billion to £106 billion between 2019-20 and 2024-25
- UK bond yields are the highest in the G7, with debt projected to peak around 83% of GDP in 2027-28
What This Means for Kent Residents
Elevated debt servicing costs of £106 billion annually constrain funding available for local public services, including NHS Kent and Medway ICB and Kent County Council services. Higher government borrowing costs may influence interest rates on mortgages, business loans and savings products used by Kent residents and businesses. Kent households should monitor their own borrowing costs and consider fixing mortgage rates if planning major purchases, while local businesses may face continued pressure on lending rates until government fiscal targets show clearer progress.
