LONDON. The cost of British government borrowing has risen sharply this week, with the yield on 10-year gilts climbing above 4.5 per cent for the first time in a year.
The move reflects growing investor unease over the government's fiscal discipline and the broader political turmoil that has unsettled Westminster since the resignation of the prime minister. Market participants have pointed to a series of policy reversals and the lack of a coherent economic strategy as factors driving the sell-off. The pound has also weakened, falling below $1.
25 against the dollar. Analysts at Goldman Sachs warned that the premium demanded by investors to hold UK debt, relative to German bunds, has widened to its highest level since the 2008 financial crisis. The Treasury has sought to downplay the developments, insisting that the country's fundamentals remain strong.
However, the opposition has seized on the data, accusing the government of presiding over a loss of economic credibility. The Bank of England, which last month raised interest rates to 5.25 per cent, is expected to come under renewed pressure to provide stability as political uncertainty persists.
