UK borrowing costs remain elevated amid political uncertainty

Susannah Streeter, chief investment strategist at Wealth Club, said: “At a time when the UK needs stability and a doubling down on efforts to attract investment, it’s having the opposite effect. Fears that the energy crunch would set off an inflation surge had already rattled bond markets.

“At a time when the UK needs stability and a doubling down on efforts to attract investment, it’s having the opposite effect. Gilt investors are the canaries in Labour’s coalmine, demonstrating the increased wariness with which the UK is being viewed. The recent sell-off in UK government debt has spiked yields, which is set to increase the amount the government has to pay in interest and could be a fresh squeeze on government spending. The yield on 10-year gilts remains highly elevated, reaching 5.19% earlier before retreating slightly   – highs not seen for 18 years, while longer-dated debt has also sold off with 30-year gilt yields at 5.86% earlier, levels last reached in January 1998.

“So, just at a time when Starmer’s challengers are calling for higher spending, and companies are crying out for tax relief, the political debacle is making both increasingly difficult. Labour’s leadership league is now dominating the airwaves, filling the gap left by Eurovision. The suited and booted contenders are chasing the Downing Street glitterball, but risk trampling chances of growth in their pursuit.”