Business
UK borrowing costs hit 27-year high adding to pressure on Reeves
Tom Espiner & Nick EdserBusiness reporters, BBC News
ReutersUK government borrowing costs have reached their highest level since 1998, adding to the pressure on the chancellor ahead of the Budget.
The interest rate on 30-year government bonds, known as the yield, jumped to 5.698%, making it more expensive for the government to borrow money.
There are rising expectations that Chancellor Rachel Reeves will increase taxes in the Budget later this year in order to meet her borrowing and spending rules, as worries grow about the state of the government’s finances.
On the currency markets, the pound also fell more than 1% against the dollar on Tuesday.
Sterling dropped to $1.3379, which is the lowest level against the US currency since 7 August.
The UK was not alone in seeing borrowing costs rise, with yields on 30-year German, French and Dutch bonds climbing to their highest 2011.
A number of factors have led to borrowing costs for governments around the globe to go up, such as geopolitical tensions, US President Donald Trump’s trade policies and the upcoming confidence vote in the French government.
‘Difficult choices’
But Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the chancellor faced “highly difficult choices” in the Budget and that she had been “dealt a warning” by investors.
“They are selling off UK government debt, clearly concerned that the government may be losing its grip on the public finances,” she said.
In its manifesto, Labour promised not to raise taxes such as income tax, VAT or national insurance on “working people”. This has led to much speculation over what taxes Reeves could raise in the autumn Budget.
One option suggested is that the freeze on income tax thresholds, which is due to end in 2028, could be extended.
Often referred to as a “stealth tax”, freezing income tax thresholds means that, over time as salaries rise, more people are dragged into paying higher rates.
There have also been reports that Reeves is considering reforming property taxes.
“With so many options for raising taxes being bandied about during the summer, there appears to be concern that the decisions made might not be sufficiently thought through,” said Ms Streeter.
“The worry isn’t just that government coffers won’t be replenished, but that they will be filled at the expense of growth, leading to a vicious circle emerging.”
On Monday, the government announced a partial reshuffle, with Darren Jones, formerly Reeves’s deputy, being given a key No 10 role by the prime minister.
The changes are focused on beefing up the economic know-how in Downing Street. Baroness Shafik, a former deputy governor of the Bank of England, has been named at Keir Starmer’s new chief economic adviser.
The moves are a recognition that the upcoming autumn’s Budget will be a defining moment in this Labour government.
Governments borrow money from investors by selling bonds – which is a loan the government promises to pay back at the end of an agreed time.
The yield on 30-year UK government bonds – known as gilts – has been rising for some months, and this makes it more expensive for the government to borrow money due to higher interest payments.
The government’s official forecaster, the Office for Budget Responsibility (OBR), takes borrowing costs into account when looking at whether the chancellor is meeting her self-imposed fiscal rules.
When she became chancellor, Reeves set out two rules on government borrowing, which she has repeatedly said are “non-negotiable”. These were:
- day-to-day government costs will be paid for by tax income, rather than borrowing by 2029-30
- to get debt falling as a share of national income by the end of this parliament in 2029-30
Part of the reason Reeves is under pressure is that her financial buffer to stick to these rules is a relatively slim £10bn. The chancellor recently refused to rule out tax rises after disappointing data on economic growth.
On Tuesday, a spokesperson for Starmer said the government’s “iron-clad commitment to our robust fiscal rules remains”, adding it had made the necessary decisions to “stabilise the public finances”.
But shadow chancellor Mel Stride said the latest market movements were “another economic disaster from Rachel Reeves – and a clear vote of no confidence in Labour from the markets”.
“With more tax rises on the horizon, the economy is now in a precarious position,” he added.
There has been a wide range of forecasts for how much money Reeves might need to raise in the Budget to meet her rules.
One factor that will influence this is the borrowing costs facing the government.
When the OBR makes makes its forecasts for government debt it looks at yields on all bonds.
Paul Dales, chief UK economist at Capital Economics, said concerns about the path of UK inflation and interest rates, combined with global issues, were pushing UK government borrowing costs up.
In addition, he added that pension funds were also not buying as much long-term government debt due to the change in recent years from defined-benefit to defined-contribution schemes.
Mr Dales said Reeves would have to raise between £18bn and £28bn in the Budget to avoid breaking her fiscal rules, and to maintain her £10bn buffer.
Households and banks “will probably feel the brunt of the higher taxes”, he said.
Thousands of young people in Scotland will benefit from skilled “clean energy jobs”, the UK Government has said, as it launched its plans to “train the next generation of energy workers”.
Energy Secretary Ed Miliband said the new plan places Scotland “at the very heart of the clean energy revolution”.
The Government said Scotland will see up to 60,000 jobs in greener energy by 2030 – a 40,000 increase from 2023.
Across the UK, it expects employment to double to 860,000 by the end of the decade, including nuclear energy.
It said 31 “priority occupations” had been identified for the switch away from fossil fuels, including plumbers, electricians and welders.
As part of the transition, the Scottish Government said on Sunday it would jointly invest £18 million with the UK Government to enable thousands of North Sea workers to access tailored support to make the change to more sustainable energy.
UK ministers said their new plans include proposals to ensure people in these jobs have “world class pay, terms and conditions”.
They said this includes closing loopholes to extend employment protections enjoyed by offshore oil and gas workers working beyond UK territorial seas.
Initiatives were also announced to encourage more veterans, ex-offenders and unemployed people into the sector.
The UK Energy Secretary said: “Communities across Scotland have long been calling out for a new generation of good industrial jobs.
“The clean energy jobs boom can answer that call – and today we publish a landmark national plan to make it happen and places Scotland at the very heart of the clean energy revolution this Government is delivering.
“Our plans will help create an economy in which there is no need to leave your home town just to find a decent job.
“Thanks to this Government’s commitment to clean energy a generation of young people in Scotland can have well-paid secure jobs, from plumbers to electricians and welders.
“This is a pro-worker, pro-jobs, pro-union agenda that will deliver the national renewal our country needs.”
Scottish Energy Secretary Gillian Martin said: “Scotland’s innovation, expertise and vast renewable energy resources will not only benefit the planet – but deliver new economic opportunities and new jobs for households and communities across the country.
“This continued and expanded funding to the Oil and Gas Transition Training Fund will support more offshore workers to take on different roles across the sustainable energy sector over the next three years – helping to deliver a fair and managed transition to the sector.
“We will continue to explore how best to support Scotland’s energy skills transition, working closely with the UK Government on options like guaranteed interview schemes, redeployment pools and skills passporting.”
Scottish Secretary Douglas Alexander added: “From offshore wind to carbon capture, Scotland is uniquely positioned to lead our clean energy revolution with world-class resources and skilled workers.
“Harnessing the potential of clean energy is an unmistakable example of how the UK Government is delivering for Scotland.
“These 40,000 new opportunities will benefit a generation of young people across Scotland and represent a pivotal moment in our mission to boost economic growth across all parts of the UK.
“This UK Government is putting money directly into the pockets of hardworking Scots.
“This comes alongside Great British Energy’s launch in Aberdeen, which is already unlocking significant investment and helping to create skilled jobs as we make Britain a clean energy superpower.”
Mumbai: India’s private banks showed contrasting trends in asset quality in Q2 FY26, with larger lenders maintaining stability while smaller players, particularly those under new leadership, reported setbacks in earnings. IndusInd Bank and Federal Bank, both navigating transitions under new MDs, did not post year-on-year growth in net profits as the chiefs accelerated clean-ups and strengthened governance.HDFC Bank, the country’s largest private lender, reported a 10.8% rise in net profit to Rs 18,640 crore, driven by a 25% jump in non-interest income and steady improvement in asset quality. MD and CEO Sashidhar Jagdishan said economic activity was improving across customer and product segments, allowing the bank to accelerate loan growth. Asset quality remained a key strength, with the bank maintaining stable ratios for net interest margin, cost-to-income, and return on assets. HDFC Bank also continued its investments in technology and innovation, including GenAI and “lighthouse experiments”, aimed at improving efficiency and customer experience over the next 18-24 months.ICICI Bank’s net profit grew 5.2% to Rs 12,359 crore despite a steep drop in treasury income. Excluding treasury, core operating profit rose 6.5%, reflecting steady underlying performance. Provisions fell 25.9%, helping gross NPAs ease to 1.58% and net NPAs to 0.39%. The lender expanded retail and business banking loans, which now account for more than half its portfolio.IndusInd Bank, under new MD and CEO Rajiv Anand, recorded a net loss of Rs 437 crore as the bank accelerated write-offs and increased provisions in microfinance to strengthen its balance sheet. The lender also continued to contend with legacy issues stemming from prior accounting irregularities. Gross NPAs improved slightly to 3.60%, while net NPAs eased to 1.04% but deposits and advances contracted, and core income fell.YES Bank reported an 18.3% rise in net profit to Rs 654 crore, supported by higher non-interest income, cost efficiency, and retail growth. Net NPAs declined to 0.3% while gross NPAs remained stable at 1.6%. The quarter marked a strategic ownership change, with Sumitomo Mitsui Banking Corporation acquiring a 24.2% stake, and the bank continued to expand its branch network and digital footprint. MD and CEO Prashant Kumar emphasised the business model and strategy remained unchanged, with efforts ongoing to improve revenues, net interest margin, and cost-to-income ratio.Federal Bank posted a 9.5% decline in net profit to Rs 955 crore due to higher provisions, even as gross NPAs fell to 1.83% and net NPAs to 0.48%. Under new MD and CEO KVS Manian, the bank focused on strengthening risk management, increasing mid-yield assets, and expanding digital transactions, which now account for over 92% of all retail and corporate activity.PNB net profit jumps 14% to ₹4904 crorePunjab National Bank reported a 14% rise in Q2 net profit to Rs 4,904 crore, with operating profit up 5.5% to Rs 7,227 crore. Total income grew 5.1%, while net interest income slipped 0.5%. Gross and net NPAs fell to 3.45% and 0.36%, respectively. Advances and deposits rose 10.1% and 10.9%. Retail, agriculture, and MSME loans drove growth. CRAR strengthened to 17.19%, digital transactions surged 31%, and full-year credit growth is expected at 11%-12%.
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Gold and silver sales alone accounted for an astonishing Rs 60,000 crore of the total trade, registering a robust 25% increase from last year’s value
Gold prices have soared by approximately 60% year-on-year, crossing the Rs 1,30,000 per 10-gram mark. (Representational image/News18)
Indian consumers defied a massive surge in prices to spend an estimated Rs 1 lakh crore on Dhanteras this year, showcasing the festival’s undiminished cultural and economic significance. According to the Confederation of All India Traders (CAIT), this massive spending spree marks a significant festive boost, with strong consumer confidence overriding high-cost pressures.
The driving force behind this record expenditure was the traditional purchase of precious metals. Gold and silver sales alone accounted for an astonishing Rs 60,000 crore of the total trade, registering a robust 25% increase from last year’s value. This surge is particularly striking given the steep rise in bullion costs: gold prices have soared by approximately 60% year-on-year, crossing the Rs 1,30,000 per 10-gram mark, while silver prices have also jumped by roughly 55%.
CAIT attributed this resilient demand to the deep-rooted Indian belief in precious metals as the most secure form of investment and an auspicious purchase on Dhanteras, the day that marks the beginning of Diwali celebrations. While volumes may have seen a slight dip, the rise in value was substantial, as many consumers opted for strategic buying—favouring lightweight jewellery, gold coins, and bullion for investment purposes to fulfill the shagun (auspicious tradition).
Beyond bullion, the festive purchasing extended across various sectors, underlining a broad economic recovery. Other major contributors to the Rs 1 lakh crore total included utensils and kitchen appliances (estimated at Rs 15,000 crore), electronic and electrical goods (Rs 10,000 crore), and vehicles, textiles, and decorative items.
The festive spending also received a further boost from the popularity of the “Vocal for Local” campaign, with consumers showing a clear preference for Indian-made products, benefiting small traders and local manufacturers across the country.
Pathikrit Sen Gupta is a Senior Associate Editor with News18.com and likes to cut a long story short. He writes sporadically on Politics, Sports, Global Affairs, Space, Entertainment, And Food. He trawls X via …Read More
Pathikrit Sen Gupta is a Senior Associate Editor with News18.com and likes to cut a long story short. He writes sporadically on Politics, Sports, Global Affairs, Space, Entertainment, And Food. He trawls X via … Read More
October 18, 2025, 22:34 IST
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