UK government borrowing for the year has fallen to a three-year low, but there are already warnings the improvement will not last because of the war in Iran.
Over the last couple of weeks, there have been a few bits of surprisingly good economical news for the government. But each of these came with the crucial caveat that the figures were from the weeks and months before Donald Trump’s war in Iran.
The latest example of this is the latest UK borrowing figures, which fell £19.8bn to £132bn in the year to March, the Office for National Statistics (ONS) said.
This was slightly below what the Office for Budget Responsibility had predicted and is the lowest March borrowing since 2022.
For the year to March, the ONS said borrowing as a proportion of GDP was 4.3% – the lowest since 2019-20.
READ NEXT: Is this the end of the Special Relationship?
However analysts are already saying it is not expected to last because of the war in Iran.
The US and Israel’s joint military action in Iran has sent the price of oil rocketing after Iran effectively shut one of the world’s most important shipping routes, the Strait of Hormuz, with energy prices widely expected to soar this summer.
The conflict is expected to cause rising inflation as well. If the government ends up offering support to households to help cope with higher energy bills, then borrowing will go up significantly.
Earlier this month, the International Monetary Fund predicted the UK economy would suffer the biggest hit of all the world’s major economies as a result of the Iran war.
And this week, the first evidence of ‘Trumpflation’ revealed itself on the UK economy as an increase in fuel prices sparked a 0.3% jump in inflation.
Chief Secretary to the Treasury, James Murray, said: “Our deficit is down £19.8bn because of our plan to cut borrowing. In a volatile world the decisions we are taking are the right ones to keep costs down, take back our energy security and cut borrowing and debt.”