Borrowing costs spike higher as Labour turmoil rattles bond markets

Borrowing costs for the UK government have increased significantly due to political uncertainty surrounding the Labour party. Speculation that Keir Starmer and Rachel Reeves might be removed from their leadership positions after the upcoming Budget has caused international investors to demand higher returns for lending money to the UK, pushing up the yields on government bonds, known as gilts. This rise in borrowing costs poses a challenge for the Chancellor as she prepares a Budget expected to include significant tax increases and potential raids on pension savings. Fears are growing that a backlash from Labour MPs against these measures could trigger a leadership challenge, with potential replacements like Wes Streeting and Torsten Bell being discussed. Investors are concerned that any change in leadership could lead to a more left-wing government, resulting in increased spending, higher borrowing, and further tax hikes. The political instability is directl... download the app to read more