Government borrowing hits second-highest August on record in setback for Healey

Chris Cheverall, head of UK at CMC Markets, states that how the debt will be financed is just as important as the borrowing figure.

He said: “The headline borrowing figure matters, but for markets the bigger issue is what it means for the cost of financing that debt.

“With gilt yields already elevated, higher borrowing puts even more focus on the bond market. That matters beyond government finances, because higher yields can feed through into mortgage rates, business borrowing and valuations across UK assets.

“The FTSE 100 has been relatively resilient, helped by its international earnings and exposure to sectors such as energy, mining and financials. But the picture is tougher for more domestically focused and interest-rate-sensitive companies if borrowing costs stay higher for longer.

“Heading into the Budget, investors will be watching not just how much fiscal headroom the Government has left, but whether the measures announced give markets confidence that borrowing can be kept under control.”