The UK government borrowed almost £15bn more than forecast in the last financial year, according to official figures highlighting contributions from inflation-related costs including pay awards.

The Office for National Statistics (ONS) reported that borrowing – the difference between total public sector spending and income – over the 12 months to the end of March came in at £151.9bn.

That provisional sum was £20.7bn more than in the same twelve-month period a year earlier and £14.6bn more than the £137.3bn forecast by the Office for Budget Responsibility (OBR) at the spring statement just a month ago, the body said.

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It added that the figure represented 5.3% of the UK’s gross domestic product (GDP), 0.5 percentage points more than in 2023/24.

It was partly driven by £16.4bn of borrowing in March – the third-highest March borrowing since monthly records began in 1993.

The provisional data left public sector net debt at 95.8% of GDP at the end of March. That is 0.2 percentage points higher than at the end of March 2024 and remaining at levels last seen in the early 1960s.

Higher borrowing is partly a consequence of government investment and spending decisions announced in the chancellor’s autumn budget last year.

But it is also a result of higher costs to service government debt, with the ONS data showing a bill of £4.3bn for March alone.

Elevated bond yields, which reflect a higher risk premium demanded by investors in return for holding UK government debt, are a result of greater turmoil in the global economy and unease over domestically-generated inflation and weak growth at a time of continued strain for the public purse.

Rachel Reeves was forced to use her spring statement in March to restore a £10bn buffer to the public finances to avoid breaking her own fiscal rules.

ONS chief economist Grant Fitzner said of the data: “Our initial estimates suggest public sector borrowing rose almost £21bn in the financial year just ended as, despite a substantial boost in income, expenditure rose by more, largely due to inflation-related costs, including higher pay and benefit increases.

“At the end of the financial year, debt remained close to the annual value of the output of the economy, at levels last seen in the early 1960s.”

The government’s efforts to bring down costs include a crackdown on the welfare bill and a renewed focus on securing growth in the economy.

However, business groups say the chancellor’s decision to impose an additional tax burden on employment from this month, mainly through higher minimum wage and employer national insurance contributions, will backfire and harm both employment and investment.

Household spending power is also set to face further strain as inflation is tipped to rise beyond 3% due to a slew of rising costs in the economy, including bills for energy and water.

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The impact of the US trade war is also starting to be felt.

A closely-watched index of activity in the service and manufacturing sectors fell into negative territory with its weakest reading since November 2022.

The survey of purchasing managers by S&P Global found export orders falling at their fastest pace since early 2020.

AJ Bell head of financial analysis, Danni Hewson, said of the data: “Many of the challenges facing the UK economy are beyond the chancellor’s control and she is currently in Washington trying to strike a deal with the US administration on tariffs that will cushion the UK without selling off the family silver.

“One of the big questions is how those changes to employer National Insurance will impact next month’s numbers, especially with inflation linked benefits and the state pension rising at the same time.

“Many people will now be eyeing that headroom created back in March which had always seemed rather insubstantial, and wondering how much will be left by the autumn.”

Responding to the figures, Chief Secretary to the Treasury Darren Jones said the government would always be responsible when it came to the public finances.

He added: “We are laser-focused on making sure taxpayer money is delivering our Plan for Change missions to put more money in people’s pockets, rebuild the NHS and strengthen our borders.”

But shadow chancellor Mel Stride said: “By fiddling the fiscal rules, increasing borrowing by £30bn a year and piling up debt – these figures are alarming but not surprising.”

Elon Musk has said the time he spends with Donald Trump’s Department of Government Efficiency (DOGE) will “drop significantly” from May and he will allocate more time to Tesla.

It comes after first-quarter profits at Tesla sank as the company grapples with falling sales, partly due to President Trump’s tariffs.

As a special government employee, Mr Musk was limited to 130 days in his role at DOGE, which is primarily aimed at slashing federal spending.

But the cuts, which included axing government jobs, have divided the country and prompted a backlash against his company, including protests and attacks on Tesla showrooms, prompting Donald Trump to label the vandals “terrorists”.

Tesla said on Tuesday that quarterly profits fell by 71% to $409m (£306.77m) from $1.39bn (£1.04bn) in the first quarter of 2024. Revenues were also well below forecasts, dropping 9% to $19.3bn (£14.5bn) between January and March.

The company’s value has plummeted since reaching a record high in mid-December. Since then, Tesla’s share price has fallen more than 50%.

Tesla’s share price has tumbled following the financial market turbulence caused by the global trade war tariffs, competition from Chinese EV rivals and concern over Mr Musk’s ability to give the firm the attention it requires.

Mr Musk’s role as chief executive of the company was among the most common questions shareholders were asking about in a question-and-answer portal ahead of an investor call on Tuesday evening.

As well as his role at the top of Tesla, he is also the CEO of space exploration company SpaceX and owns social media company X, formerly known as Twitter.

Musk has ‘lost focus’

An early Tesla investor Ross Gerber said in a recent interview with Sky’s Business Live that Mr Musk had lost his focus and was now too “divisive”.

There has been no clear sign of improvement at Tesla as much-awaited updates on making affordable cars and developing driverless technology left some questions unanswered.

Work on an affordable car remained “on track for start of production in the first half of 2025”, Tesla’s financial results said, but no details on a prototype were given.

Production of Tesla’s self-driving robotaxi, named Cybercab, is scheduled to start in 2026.

Tariffs harming outlook

Uncertainty was also evident in the outlook statement, which pointed to the harm tariffs could pose to the business.

“It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,”

“The rate of growth this year will depend on a variety of factors, including the rate of acceleration of our autonomy efforts, production ramp at our factories and the broader macroeconomic environment”.

While Teslas are made in the US, there are also factories in China and Germany. Under the tariff regime, those car parts are subject to additional taxes when they enter America.

The new owner of WH Smith’s high street arm is drawing up plans which could result in the closure of nearly a quarter of the stores operated by Hobbycraft, the arts and crafts chain.

Sky News has learnt that Modella Capital, a private investment firm which specialises in taking over troubled retailers, is preparing to launch a company voluntary arrangement (CVA) at Hobbycraft as soon as Wednesday.

People close to the proposals said that nine of its shops would be closed, with the loss of roughly 100 jobs, and that 18 more would remain open only if negotiations with landlords over rent cuts concluded successfully.

A further 97 stores will remain unaffected by the CVA, the people added, protecting 1,800 jobs.

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If the talks with landlords do not progress as envisaged and the 18 affected stores are also earmarked for closure, at least 150 more redundancies could be triggered based on Hobbycraft’s average number of employees per store.

Some job losses are also expected at the company’s head office and distribution operations, according to insiders.

The Hobbycraft CVA is expected to be launched shortly before Modella also pursues a restructuring at The Original Factory Shop (TOFS), the discount chain it acquired just two months ago.

One industry source speculated that as many as between 30 and 40 TOFS outlets could close, resulting in hundreds more layoffs.

The dual restructuring processes will raise questions about whether Modella plans a similar cull of shops and workers at WH Smith, which it has said will be renamed TG Jones following the takeover.

In a statement, a Modella spokesman said: “Modella Capital is absolutely committed to bricks and mortar retail, at a time when the sector is coming under increasing pressure.

“[Modella] understands that high streets provide a vital service to consumers, are an essential source of employment and are key to the future success of local economies.

“Modella Capital believes that many retailers can thrive on the high street; particularly those with a distinctive offer and a loyal customer base.

“Where necessary, Modella Capital has the skills and experience to restructure retailers that require it, in order to ensure they create profitable, ongoing businesses that will continue to serve communities and employ thousands of people across the UK.”

FRP, the professional services firm, is overseeing the Hobbycraft CVA, while Interpath Advisory is working on the equivalent process at TOFS.

CVAs – a widely used tool in the retail and hospitality sectors in recent years – are frequently utilised to facilitate store closures and rent cuts from landlords.

Modella bought Hobbycraft, which was founded in 1995, from the private equity firm Bridgepoint last summer.