UK Borrowing Costs Hit 18-Year High as Pound Weakens

UK government borrowing costs climbed to an 18-year high while the pound weakened amid political uncertainty surrounding the Labour Party leadership contest, Rachel Clun reported for BBC News.

The British pound weakens as investor concerns grow over UK political developments.

Although borrowing costs rose across Europe, analysts said the UK experienced sharper movements due to investor concerns that a government led by Andy Burnham could increase public borrowing.

The yield on the UK’s 10-year government bond — effectively the interest rate charged to the government for a 10-year loan — briefly rose above 5.17% at one point, its highest level since 2008.

Meanwhile, the pound fell 0.3% against the US dollar to around $1.336, after declining sharply late last week following Burnham’s announcement.

Kathleen Brooks, research director at XTB, said the market reaction suggested investors viewed Burnham as “the least market-friendly” among Labour leadership contenders.