{"id":102386,"date":"2026-08-13T01:13:18","date_gmt":"2026-08-13T01:13:18","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/102386\/"},"modified":"2026-08-13T01:13:18","modified_gmt":"2026-08-13T01:13:18","slug":"britain-wont-be-a-bond-market-safe-haven-for-long","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/102386\/","title":{"rendered":"Britain won\u2019t be a bond market \u2018safe haven\u2019 for long"},"content":{"rendered":"

In news that will come as a shock to anyone living in Britain, the country has reportedly become<\/a> a \u201csafe haven\u201d for bond markets. There is a certain irony that Andy Burnham, a prime minister who has pitched himself as a change candidate, is benefiting from Keir Starmer\u2019s attempts<\/a> to bring \u201cmoderation and stability\u201d to British politics. What has made a country with a \u00a3115-billion public sector spending deficit<\/a>, the third-largest trade deficit<\/a> in the world, persistently higher inflation<\/a> than the rest of the G7, and sluggish growth attractive to international investors?<\/p>\n

Unsurprisingly, this has very little to do with what is happening in Britain at present. If new Chancellor John Healey wants to thank anyone for the improvement in the country\u2019s borrowing position, he should pick up the phone to the White House rather than to his predecessor.<\/p>\n

Donald Trump\u2019s economic strategy has had two main pillars. Firstly, his Big Beautiful Bill was a $4.5-trillion tax giveaway<\/a>, primarily to the richest households in America. This tax cut, as well as the Iran war and other spending measures, has sent the federal deficit soaring, with expenditure forecast to exceed revenue by $2.1 trillion<\/a> this financial year, over $400 billion higher than the previous financial year.<\/p>\n

Secondly, Trump has repeatedly called<\/a> for interest rates to be cut and attacked<\/a> the Federal Reserve for keeping interest rates too high, with inflation remaining above its 2% target. The US President is trying to engineer an artificial boom in the economy to keep his voters happy and the stock market ticking upwards \u2014 one of the only measures that he seems to take seriously. Looking at the US from a bondholder\u2019s perspective, there is a significant risk that Trump\u2019s policies could trigger an inflationary spiral. Institutional investors looking for certainty are now casting their eye around the world to find lower-risk sources of debt.<\/p>\n

The Labour government\u2019s promise to stick to some version of the fiscal rules, the perceived independence of the Bank of England and lower-than-forecast<\/a> inflation in June have all come together to make Britain an attractive place to store money. However, it does not take a financial genius to see that any \u201csafe haven\u201d status is likely to be short-lived.<\/p>\n

Markets have hardly given the UK a resounding vote of confidence. The price of Treasury gilts has come down<\/a> slightly, but a 10-year gilt is still more expensive than it was at the start of the year. What\u2019s more, the headwinds facing the British economy remain significant. UK energy prices are very high<\/a>, and imports are increasing<\/a> 71% faster than exports. Overall economic growth is forecast<\/a> to be less than 1% in 2026, and this could fall even further if the Strait of Hormuz is kept closed. A betting man would assume that inflation and the deficit are going to remain high, pushing up the price of borrowing.<\/p>\n

The dream scenario for Burnham and Healey is that America continues to lurch from crisis to crisis: the war in Iran is resolved, but tax cuts and spending splurges keep inflation high and Trump continues his war of words with the central bank to stop interest rates being raised. However, just as likely is a scenario where the war continues but the inherent dynamism of the American economy sees production increase, inflation come down, and investor confidence return. The UK, still exposed by the conflict in the Gulf, would return to being on the inflation watchlist and the price of Government debt would slowly creep up again.<\/p>\n

Britain must use the precious breathing space created through unstable US economic policy to develop a credible pathway to lowering inflation, reducing its trade deficit and keeping borrowing under control. The upcoming autumn Budget is a vital opportunity to do this before America sorts itself out.<\/p>\n","protected":false},"excerpt":{"rendered":"In news that will come as a shock to anyone living in Britain, the country has reportedly become…\n","protected":false},"author":2,"featured_media":102387,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[2],"tags":[7786,13387,13,361,1449,431,474],"class_list":["post-102386","post","type-post","status-publish","format-standard","has-post-thumbnail","category-britain","tag-andy-burnham","tag-bond-market","tag-britain","tag-donald-trump","tag-iran-war","tag-uk-economy","tag-uncategorized"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117085549794918679","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/102386","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=102386"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/102386\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/102387"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=102386"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=102386"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=102386"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}