UK Government Borrowing Costs Hit 30-Year High

UK government borrowing costs have surged to their highest levels since the Great Recession, with the 10-year gilt yield reaching 4.81% and the 30-year gilt rising to 5.36%. This spike in yields, driven by investor concerns over stagflation and government fiscal sustainability, has eroded Chancellor Rachel Reeves's financial headroom, leaving her with only £1 billion to work with before needing to consider tax increases or spending cuts. Economists warn that the Office for Budget Responsibility may determine Reeves is on track to miss her fiscal targets, further complicating her economic plans. The rising costs of servicing national debt are forecast to consume 7% of public spending, a significant increase from previous estimates. As the government prepares for additional bond sales, there is mounting pressure to adjust fiscal policies amid concerns about slow economic growth and persistent inflation. Overall, the increase in borrowing costs poses severe implications for the UK's economic stability and public finances.