UK borrowing costs at highest for a year after Budget

Published On Oct 31, 2024, 1:18 PM

The UK government borrowing costs surged to the highest level in over a year following Chancellor Rachel Reeves' recent Budget announcement, which proposed a significant increase in government spending amounting to nearly £70 billion funded by tax hikes for businesses and additional borrowing. This rise in interest rates on government bonds, or yields, reflects market skepticism about the government's fiscal choices, indicating potential inflation concerns. Analysts view this movement as a reaction to the Budget, which may lead to slower interest rate cuts than previously expected, with forecasts suggesting rates won't dip below 4% until 2026. The Chancellor's approach has raised questions about the appetite for increased sovereign debt among investors, leading analysts to predict ongoing volatility in bond yields as the markets take a cautious stance. Overall, market sentiment regarding the UK's fiscal health is becoming increasingly nervous as a result of these developments.