Economists say chancellor could be forced to raise taxes or announce deeper spending cuts later this year; stocks, dollar, oil prices rise on hopes of US-China trade deal

• UK annual borrowing exceeds forecasts by almost £15bn

The collapse in confidence and drop in output during April raise red flags for the economic outlook and add pressure on the Bank of England to reduce interest rates again at its May meeting, said Chris Williamson, chief business economist at S&P Global Market Intelligence.

While recent months have been characterised by UK businesses treading water, broadly stagnating since last autumn’s budget, businesses are reporting more of a struggle to keep their heads above water in April.

April’s fall in output was the largest recorded for nearly two and a half years, consistent with GDP declining at a quarterly rate of 0.3%, reflecting falling activity and demand across both manufacturing and services.

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Figure of £151.9bn more than £20bn higher than previous financial year, adding to pressure on Rachel Reeves

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Britain entered the economic shock from Donald Trump’s trade wars with government borrowing having overshot official forecasts by almost £15bn in the most recent financial year.

Adding to the pressure on the chancellor, Rachel Reeves, the Office for National Statistics said borrowing in the financial year ending in March was £151.9bn, more than £20bn higher than in the previous financial year.

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UK government borrowed £151.9bn in year to March; investors cheered by hopes of US-China trade deal

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Government borrowing in the UK rose more than expected last month, which means the government borrowed nearly £15bn more than forecast over the year than in the previous fiscal year, underlining the challenges the chancellor Rachel Reeves faces.

Debt interest payments reached £4.3bn in March, the highest March figure since monthly records began 27 years ago. This reflects the fiscal challenge the chancellor faces. Higher debt servicing costs as a share of total revenues will leave the public finances more exposed to future economic shocks.

Rachel Reeves continues to hold the fiscal line, but the next six months will be critical—and she needs some clear wins. While her spring statement restored the £9.9bn headroom, that cushion remains precarious. In the worst-case scenario outlined by the government’s independent forecaster, Trump’s new tariffs could alone shave 1% off UK GDP—enough to wipe out the headroom entirely. The rising cost of government borrowing and growing global uncertainty are compounding the pressure for Reeves to put tax rises on the table during the autumn budget.

9am BST: Eurozone HCOB PMI surveys flash for April

9.30am BST: S&P Global PMIs flash for April
10am BST: Eurozone trade for February

2.45pm BST:: US S&P Global PMIs flash for April

5.30pm BST: Bank of England governor Andrew Bailey speaks

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