UK borrowing costs hit highest level since 2008 financial crisis
Why it matters: Soaring UK borrowing costs and limited fiscal space mean less government support for households, impacting consumer spending and economic stability.
- UK borrowing costs have hit their highest level since the 2008 financial crisis, with the benchmark rate for government's long-term borrowing costs climbing above 5%.
- Government debt sell-off is attributed to concerns about higher interest rates, sticky inflation, and the potential public cost of helping households with energy bills, according to experts.
- Official data revealed UK borrowing rose to £14.3bn in February, the second highest for that month since records began, significantly exceeding economists' expectations of £8.8bn.
- Danni Hewson (AJ Bell) states the Treasury is "stuck between a rock and hard place" managing these issues, while Ruth Gregory (Capital Economics) and Charlie Bean (former Bank of England) agree there's limited scope for large-scale fiscal support for energy bills due to the government's "worse fiscal position."
- The Conservatives blame Labour for "irresponsible choices," while Labour's Sir Mel Stride criticizes the government for "saddling the next generation with the cost of their failure to live within our means."
- Cornwall Insight predicts typical annual household energy bills could rise by £332 in July, making the government's limited capacity for aid particularly impactful.
The UK's borrowing costs have surged to their highest since the 2008 financial crisis, with the benchmark rate for long-term government borrowing climbing above 5%, driven by fears over public finances amid an energy price surge sparked by the US-Israel war with Iran. This debt sell-off, coupled with unexpectedly high February borrowing, severely limits the government's ability to offer substantial energy bill relief, a stark contrast to its fiscal maneuverability in 2022.
