UK Borrowing Overshoots Forecasts as Energy Costs Hit Manufacturing
Public sector borrowing reached £18.3bn in August, exceeding the OBR's forecast by £3.5bn, with year-to-date borrowing £8.1bn above projections. Ineos halted production at three Hull chemical plants, citing UK gas prices around 12 times US levels. Employers continue to face hiring barriers due to employment costs, while 28 insolvency notices were recorded.
The ONS figures show borrowing for the financial year to August reached £77.3bn, running £8.1bn ahead of the OBR's projection. The October Budget arrives with debt-interest and public-service costs still sensitive to inflation and borrowing costs, adding pressure on fiscal decisions.
Ineos's Hull sites produce acetic acid, acetic anhydride and ethyl acetate — inputs for pharmaceuticals, clothing, cosmetics, detergents and construction. The company calls them Europe's last world-scale acetyls units, with European gas prices roughly eight times Chinese coal-based production costs.
The convergence of higher-than-forecast borrowing, energy-driven production halts and rising insolvency notices could create a challenging environment for small businesses. Suppliers to energy-intensive manufacturers may face disrupted orders and slower payment cycles, while tax uncertainty ahead of the October Budget complicates forward planning. Consumers could feel knock-on price effects if chemical supply disruptions ripple through pharmaceuticals, cosmetics and construction materials. SMEs extending credit may need to scrutinise customer exposure more closely as these pressures accumulate.