UK’s borrowing costs at highest level since 1998
The cost of long-term government borrowing in the UK has risen to its highest level in nearly three decades, while the pound has fallen against the dollar and the euro.
On Tuesday, the yield — or interest rate — on 30-year government bonds briefly reached 5.70%, the highest since 1998, before settling slightly lower. Bond yields rise when investors sell them, pushing up the cost for governments to borrow.
The UK now has the highest borrowing costs among the G7 economies, fuelled by stubborn inflation and rising public debt.
The pressure comes just weeks before Chancellor Rachel Reeves delivers her first Autumn Budget. Investors are watching closely to see how the government plans to reduce the deficit without derailing growth. Higher borrowing costs mean the government has less financial room to manoeuvre, as more of its budget is needed to pay interest on debt.
The pound fell about 1% against the dollar and 0.4% against the euro, with analysts pointing to market nerves over how Britain’s debt situation will be handled.
The UK isn’t alone: borrowing costs have been climbing across major economies. In the US, yields have risen amid concerns over the country’s growing debt and political tensions around the Federal Reserve. In Germany, bond yields are at their highest in over a decade after the government announced a major increase in defence and infrastructure spending.
Analysts say Reeves may need to announce tax rises or deeper spending cuts in the autumn to reassure investors. So far, efforts to rein in welfare spending have faltered, adding to worries about how quickly the government can stabilise the country’s finances.
Meanwhile, Prime Minister Keir Starmer has reshuffled his Downing Street team in what some see as an attempt to restore confidence and address Labour’s recent dip in the polls. But some economists argue that investors remain unconvinced, noting that difficult decisions on spending have yet to be made.
Right-leaning media have heavily reported on the statistics with a strong anti-left bias, while left-leaning media have taken a more gentle albeit concerned approach.
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