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The UK’s borrowing costs have hit their highest level since the 2008 global financial crisis, as disappointing borrowing numbers add to a brutal sell-off for gilts driven by inflation fears.
Ten-year gilt yields rose 0.09 percentage points to 4.94 per cent on Friday, topping the level they hit in January last year as worries swirled over the public finances and the prospect of rising inflation.
Surging oil and gas prices due to the conflict in the Middle East have driven up near-term inflation expectations and shifted market expectations from interest rate cuts to rises by the Bank of England, which has knocked bond prices.
The rise in borrowing costs will deepen the challenges facing chancellor Rachel Reeves. Concerns over the hit from an energy shock were further fuelled on Friday by figures showing the UK had borrowed a higher than predicted £14.3bn in February.
“February’s public finances figures showed that the fiscal position was worse than expected even before the full impact of the surge in energy prices is felt,” said analysts at Capital Economics.
This is a developing story