UK Long-Term Borrowing Costs Reach Highest Level Since 1998

Long-term borrowing costs for the UK government have surged to a 28-year high, intensifying pressure on Prime Minister Andy Burnham as he prepares to deliver his administration's first Budget next month. The spike comes amid growing global investor anxieties regarding inflation, soaring state borrowing levels, and massive spending by tech giants.

Data showed that the yield on 30-year British government gilts climbed to 5.89% on Tuesday, marking the highest rate recorded since 1998. Furthermore, the benchmark 10-year gilt yield rose to 5.22%, reaching its highest point since June 2008 during the peak of the global financial crisis.

Stock photo for illustration only, not from the actual event

This upward pressure is not isolated to the UK; borrowing costs across the US, Japan, and Europe have experienced comparable spikes in recent days. Market participants point to a combination of inflation fears, escalating government debt, and heavy capital deployment by major technology firms into artificial intelligence as key drivers reshaping global lending rates.

Addressing the House of Commons for the first time as prime minister on Tuesday, Burnham emphasized that the economy and the cost of living remain the country's most critical issues. Despite tightened public finances, he pledged to pursue substantial changes to support households, drawing criticism from Conservative leader Kemi Badenoch, who accused him of living in the past.

"Britain is not where any of us would wish it to be."

Andy Burnham

Meanwhile, Chancellor John Healey, attending global finance meetings in the United States, told the G20 that the UK maintains the fastest growth in the G7 for 2026 and is reducing borrowing at a record pace among major economies. However, market experts such as Karen Ward of J.P. Morgan and Kathleen Brooks of XTB have warned that record debt and elevated bond yields signal a challenging fiscal environment for the new government.

Source: BBC Business