The UK's national debt has risen to a new milestone, breaching £2.44 trillion in 2025/26, according to the latest report from the Debt Management Office (DMO). This represents an increase of £64 billion compared to the previous year, underscoring the government's ongoing reliance on borrowing to finance its operations.
The DMO's annual report and accounts provide a detailed breakdown of the UK's national debt strategy, outlining the volume and type of gilts (government bonds) issued in 2025/26. With £143 billion worth of new debt issued during this period, the government has continued to rely on market funding to plug fiscal gaps.
Higher inflation rates and rising interest rates have significantly contributed to the growing national debt burden. The Bank of England's decision to raise interest rates to combat inflation has resulted in higher servicing costs for the government, which must now dedicate an additional £26 billion towards interest payments on its outstanding debt. This trend highlights the delicate balance between managing public finances and mitigating economic headwinds.
For UK households and businesses, the management of national debt carries significant implications. A growing national debt, coupled with rising interest rates, can dampen investor confidence, impact the value of sterling, and potentially increase borrowing costs for individuals and companies. While the FTSE 100's performance is influenced by multiple factors, the broader economic environment shaped by government debt management remains a key consideration.
The DMO's report serves as a vital tool for assessing the UK's public finances, offering transparency into how the government funds its operations and manages its liabilities. Analysts and economists will closely scrutinise the figures to understand the trajectory of the national debt and its implications for future fiscal policy.