22 October 2026: UK debt soars past £3 trillion

Britain’s national debt has passed £3 trillion for the first time, official figures show, a week before the Chancellor delivers his Budget.

The Government borrowed £24.5 billion in September, £1.9 billion more than forecast, and the interest cost reached £10.9 billion, the highest September figure since monthly records began in 1997.

The Office for National Statistics provisionally estimates public sector net debt at £3,005.0 billion at the end of September, £91.7 billion more than a year earlier.

The debt first passed £1 trillion in February 2010, after the financial crisis, and £2 trillion in June 2020, during the pandemic. The third trillion has been added in just over six years, under governments of both parties.

As a share of the economy, debt stands at 94% of GDP. That is slightly lower than a year ago, but the ONS says it is at levels last seen in the early 1960s.

September borrowing was £1.8 billion higher than in the same month last year. Over the first six months of the financial year, borrowing reached £97.8 billion. That is £4.4 billion less than at the same point last year, but £6 billion more than the Office for Budget Responsibility, the official forecaster, expected.

The ONS says that was the 10th highest April to September borrowing figure since monthly records began.

The overshoot is not down to weak tax receipts. Central government receipts were £5.8 billion above forecast, helped by Corporation Tax, National Insurance and Income Tax. The problem is spending. It was £8.9 billion above forecast, with interest £3.8 billion higher than expected and benefit payments, including pensions, £2.5 billion higher.

Interest alone cost £10.9 billion in September, £1.6 billion more than a year earlier and £2 billion more than forecast. It was only the eighth time the monthly bill has topped £10 billion.

Gas from the Jackdaw field in the North Sea is expected to supply UK properties this winter after the North Sea Transition Authority granted consent to operator Adura.

The consenting decision, made after Energy Secretary Miatta Fahnbulleh considered the environmental statement and agreed to grant consent, follows an earlier consent that the court ruled unlawful.

Further environmental information was subsequently submitted for the projects. Fahnbulleh has now said the Jackdaw decision “is compatible with the UK ’s legally binding climate commitments”. An updated consenting decision on Rosebank has yet to be announced.

Adura, the developer behind the Jackdaw project, said the decision will enable gas from the site to be supplied “within weeks”. It estimates that, at peak production, Jackdaw could produce enough gas to heat around 1.4 million UK homes.

Prime Minister Andy Burnham said the decision “will protect hundreds of jobs and help keep millions of homes warm this winter”.

“At a time when people are really struggling, it’s right that we look responsibly at maximising the existing energy reserves we have in Britain that could help,” Burnham said. “We’re committed to moving towards renewable energy and reaching net zero by 2050. But even on our ambitious climate path, we’ll still require oil and gas as part of our energy needs for decades to come.”

Inflation has risen to its highest rate in almost a year, as surging petrol and diesel prices have pushed up the cost of living, new figures show, casting a gloomy shadow over John Healey's first Budget as chancellor next week. But worse news: experts warn inflation is set to rise further and hit 4%, forcing the Bank of England to raise interest rates next month and in February.

The Office for National Statistics (ONS) said Consumer Price Index (CPI) inflation was 3.5% in September, up from 3.1% in August.

This was the highest CPI rate since the 3.6% recorded in October last year, and it was above the 3.4% most economists expected for the month.

Prices are rising faster than before, and inflation is drifting further from the Bank of England's 2% target. Transport prices drove most of last month's higher inflation, particularly at the pump. Overall, motor fuels rose 30% in the year to September, up from 23% YoY in August, ONS data showed.

Between August and September, average petrol prices rose by 8.2 p to 169.5 p per litre, the highest level in around four years. Diesel also surged by 10.7 p to 192.5 p, the highest price since July 2022. According to RAC figures, average diesel prices surpassed 200p a litre for the first time at the beginning of this month. Fuel costs have been soaring because the Iran war has squeezed global oil and gas supplies.

ONS chief economist Grant Fitzner said: “Inflation climbed notably in September to its highest annual rate in almost a year. “Increased fuel prices were again the main driver, with the cost of diesel the highest since July 2022.

“Other upward pressures included airfares and, to a lesser extent, computer games and live events, which are often volatile. “These were partially offset by the cost of hotel stays, where prices rose by less than this time last year.

“The annual cost of both raw materials and goods leaving factories continued to rise, driven by higher crude oil and petrol prices, respectively.”

Sterling had a generally positive session on global FX markets, strengthening against most major currencies and extending its recent outperformance, particularly against the Euro.

Fed Chair Kevin Warsh doesn't talk about rate hikes; he prefers 'price stability'. He tends to avoid giving explicit guidance on whether the Federal Reserve will raise or hold interest rates. Instead, he repeatedly frames policy around the Fed's ultimate objective of maintaining stable prices and achieving its inflation target.

The distinction matters because rate hikes are a specific policy tool, whereas 'price stability' is the policy goal.

Warsh has explicitly said he does not want to prejudge future meetings and does not believe in signalling in advance what the Fed will do. Instead, he emphasises the Fed's commitment to delivering price stability.

The American housing market slowed in September to a rate not seen since the National Association of Realtors began tracking in 2001. Contracts fell 7.3% across all regions, and the economists Reuters surveyed expected a 0.5% dip. Economists nationwide seem unable to accept the effect higher interest rates are having on people’s intentions to move house.

Lawrence Yun, NAR's chief economist, describes the market as a staring contest, with buyers and sellers both waiting for mortgage rates to come down. Builders are blinking first, since every house they can't sell keeps costing them interest. About 43% cut prices in October, the most since 2020, and they're building less. Permits for new houses fell 4%, and apartment construction is down about a quarter from last year.

According to the Washington Post, Ukraine’s noble resistance to Russia’s onslaught is as glorious as Britain’s lonely resolve during Hitler’s Blitz in Autumn 1940. Donald Trump’s situational ethics, where what is ethical depends on the situation, have produced this grim serendipity: his enlistment in Vladimir Putin’s criminality is an election-eve illustration of the cascading absurdities of his downward-spiralling Presidency.

By waiving various sanctions on Russia, he has effectively nullified a recently passed law that Congress intended to intensify economic pressure on Russia. This benefit for Putin’s criminality coincided with reported delays in intelligence sharing with Ukraine and in planned transfers of missile interceptors to Ukraine.

“Russia,” said Trump, “frankly has been fine on Ukraine; they haven’t been doing much.” Not much other than missile and drone barrages against civilian targets and energy infrastructure as winter approaches. Trump seems receptive to Putin’s suggestion that he, Putin and China’s Xi Jinping should meet to end the war without Ukraine’s participation. Not a new idea. The September 1938 Munich conference sealed Czechoslovakia’s fate without the nuisance of Czechoslovakia’s involvement.

Trump, however, is thinking about something more important to him than Europe’s largest war since the one that Munich presaged. He is after votes for Republicans, so he wants to shred another law, the one banning the purchase of energy from Russia.

He wants to buy diesel, which he weirdly thinks will arrive in time to lower prices, while furious farmers blame the Iran war for making it excruciating to fuel their combines. And long-haul truckers are incandescent about $1,000 fill-ups.

The U.S. economy has averaged roughly 1.2% GDP growth over each of the past three quarters. One of the two main factors keeping the economy afloat is the massive surge in tech spending on the AI infrastructure build-out. However, with many hyperscalers' free cash flow turning negative and the five major hyperscalers having accumulated about $3 trillion in off-balance-sheet obligations, it is debatable whether capex spending can continue to rise at this breakneck pace.

Another key economic driver is the ‘wealth effect’ from the upper tier of the K-shaped economy. Over the past decade, American households' mutual fund and equity holdings have tripled to $60 trillion. However, these holdings have become increasingly concentrated at the very top of the income ladder. The bottom 50% of households hold only 2% of these assets.

The U.S. dollar weakened modestly in global FX markets, with the Dollar Index slipping to its lowest October close and staying near a three-week low. The DXY closed around 101.68, down approximately 0.05% on the day.

The yield on France's benchmark 10-year government bond surpassed 5% yesterday, its highest level since 2002, as investors demanded higher returns for holding the country's debt amid a budget standoff and violent street protests.

French yields have been rising for weeks as lawmakers wrangle over a 2027 budget that calls for billions of Euros in spending cuts to reduce a debt pile now at around 120% of France's GDP, one of the highest in the eurozone and well above the EU limit of 60%.

The Treasury's OAT bond is also used to set interest rates across a wide swath of the French economy, meaning borrowing costs could begin to rise for businesses and households. The last time it was that high was during the dot-com financial crisis.

The spread between the 10-year yield and the German 10-year bond, considered the European benchmark of creditworthiness, also surged to nearly 160 basis points.

The bond selloff puts further pressure on the government ahead of a decision tomorrow by the ratings agency Moody's on France's sovereign credit rating, with most economists expecting a downgrade that would automatically raise the government's borrowing costs.

Prime Minister Sébastien Lecornu is seeking approval for a 2027 budget in Parliament despite lacking a majority, to pass the €43 billion in spending cuts he wants. Even if approved, the budget would only reduce France's deficit to 5% of GDP next year, well above the 3% limit for EU members.

While the French debt crisis has focused economists' attention on the region's second-largest economy, Germany, its largest economy, saw economic confidence deteriorate more than expected in October, with private spending and investment remaining weak due to high energy prices, according to Tuesday's survey results from the Mannheim-based Centre for European Economic Research (ZEW).

The economic confidence index fell to a three-month low of 28.1 in October, down from 34.7 the previous month. The score was forecast to drop to 30.2.

"The German economy is slowly emerging from stagnation, but the recovery is not yet self-sustaining," ZEW President Achim Wambach said.

"Private consumption and investment remain weak because of high energy prices: They put real incomes under pressure, increase production costs and keep inflation higher for longer," Wambach added.

The start of the fourth quarter presented a mixed sectoral picture. Banks and insurance companies fell sharply in October.

The service sector and the telecommunications industry also recorded contractions. By contrast, the steel and metal manufacturing sectors and the electronics industry showed positive signs.

Furthermore, the survey showed that assessments of the current situation improved notably in October. The corresponding index climbed to -35.9 from -47.1 in September.

Economic sentiment in the Eurozone fell sharply in October; the current situation index dropped 0.9 points to -14.8.

The single currency posted a mixed-to-slightly-weaker performance in global FX markets yesterday, losing ground against sterling but recovering modestly against the US dollar.

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