A global sell off in government bonds has created new upward pressure on UK borrowing costs. The yield on 10 year UK bonds, known as gilts, reached 5.38 percent by mid morning on Thursday. This figure is nearing a 19 year high that was established just last week. The rising cost associated with these gilts will increase the upfront expense of government investment.
This increase in borrowing costs limits the Chancellor's flexibility and comes before a challenging budget for John Healey next month. International organizations have issued warnings about growing debt and borrowing risks. Separately, Burnham continues to assert his view that the UK is overly dependent on bond markets.