{"id":375618,"date":"2025-08-26T18:38:19","date_gmt":"2025-08-26T18:38:19","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/375618\/"},"modified":"2025-08-26T18:38:19","modified_gmt":"2025-08-26T18:38:19","slug":"britains-borrowing-costs-surge-close-to-a-27-year-high-as-experts-warn-country-faces-a-moron-premium-under-rachel-reeves","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/375618\/","title":{"rendered":"Britain’s borrowing costs surge close to a 27-year high as experts warn country faces a ‘moron premium’ under Rachel Reeves"},"content":{"rendered":"

By JOHN-PAUL FORD ROJAS, DEPUTY BUSINESS EDITOR<\/a> <\/p>\n

Published: 13:09 EDT, 26 August 2025 | Updated: 14:18 EDT, 26 August 2025 <\/p>\n

UK borrowing costs surged close to 27-year highs today amid claims that Britain is ‘drifting without an anchor’ and facing a ‘moron premium’.<\/p>\n

The latest sell-off in government bonds, known as gilts, piled fresh pressure on Rachel Reeves<\/a> ahead of this autumn’s Budget<\/a> following a weekend in which she was warned she could require a 1970s-style IMF<\/a> bailout.<\/p>\n

It saw yields on 30-year gilts – which rise as prices fall – climb to over 5.6 per cent, a whisker away from a peak in April when they hit the highest level since 1998.<\/p>\n

And the gloom spread to the stock market<\/a> as Deutsche Bank experts sounded the alarm over rising unemployment and consumer caution.<\/p>\n

Shadow Chancellor Mel Stride<\/a> said of the gilts sell-off: ‘This is what happens when you spend and borrow like there’s no tomorrow.’<\/p>\n

Simon French, chief economist at City broker Panmure Liberum, said a ‘moron premium’ on borrowing – a term first used to describe bond market reaction to Liz Truss<\/a>‘s disastrous 2022 mini-Budget – had made a comeback since Ms Reeves’ Spring Statement.<\/p>\n

‘Bond market pricing suggests UK fiscal policy is drifting without an anchor,’ Mr French said.<\/p>\n

The gilt moves yesterday partly reflected wider global bond market jitters.<\/p>\n

But they also represented a less than favourable verdict on Labour’s reported decision to bring in Left-wing pensions minister Torsten Bell to help write the Budget.<\/p>\n

\"Chancellor <\/p>\n

Chancellor Rachel Reeves\u00a0<\/p>\n

\"How <\/p>\n

How Britain’s gilt yields have soared – raising the country’s borrowing costs\u00a0<\/p>\n

Julian Jessop, economics fellow at the Institute of Economic Affairs, a free market think-tank, said markets were ‘not thrilled’ about Mr Bell having a bigger say ‘presumably because this makes spending cuts even less likely’.<\/p>\n

The Chancellor is dependent on investors who finance Britain’s borrowing by buying gilts – but are now worried about her ability to balance the books as forecasts suggest she faces a financial black hole of up to \u00a350billion.<\/p>\n

And on Friday, ratings agency Fitch sounded the alarm over the success of Labour backbenchers recently in derailing welfare reforms and winter fuel payment cuts – which it said had increased the risks of her failing to make the sums add up.<\/p>\n

Leading economists warned over the weekend that Ms Reeves could be on course to follow in the footsteps of a previous Labour Chancellor, Denis Healey, who was forced to go cap in hand to the International Monetary Fund in 1976.<\/p>\n

Ms Reeves looks increasingly likely to respond to the pressure by staging a mammoth tax raid.<\/p>\n

Speculation suggests the Chancellor could target pensions, property sales, or inheritance tax – or hike taxes for hard-working families by stealth by freezing income tax thresholds.<\/p>\n

But critics say that risks doing even more damage and Labour must instead make cuts.<\/p>\n

Tory business spokesman Andrew Griffith said the latest increase in gilt yields showed that ‘Labour’s reckless spending is hammering taxpayers’.<\/p>\n

He added: ‘Every time this rate goes up, it’s an even heavier burden on the shoulders of the next generation. We’ve got a huge problem on our hands, and cutting spending is the only way to solve it.’<\/p>\n

The fear is that further tax hikes could add to the damage already done by the Chancellor in her previous Budget, when she announced a \u00a325billion raid on employer national insurance.<\/p>\n

That has made it more expensive for employers to hire – especially affecting low-paid or part-time staff – and been blamed for a rise in unemployment.<\/p>\n

Yesterday, analysts at Deutsche Bank said the stage was set for what had been a brighter period for the jobs market to come to an end.<\/p>\n

‘The end of 2024 and early 2025 are likely to have been a sweet spot with real wage growth set to slow and fear of unemployment set to build from here,’ they said.<\/p>\n

Deutsche’s experts said that consumer confidence appeared to ‘remain subdued’ and that according to its ‘fear index’ of economic indicators ‘things may be getting worse’.<\/p>\n

That helped send UK retail shares sliding, with Primark owner Associated British Foods down 4 per cent, B&Q owner Kingfisher off by 4.3 per cent and Wickes by 8.6 per cent.<\/p>\n

The FTSE 100 index of leading stocks retreated from a record closing high seen last week, falling by 55.6 points or 0.6 per cent.<\/p>\n

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