UK’s higher borrowing costs compared with major countries ‘may be coming to an end’

The Guardian - World NewsCenter-LeftEN 2 min read 100% complete by Tom KnowlesDecember 9, 2025 at 11:30 PM

AI Summary

medium article 2 min

A report by the Institute for Public Policy Research (IPPR) suggests the UK's higher borrowing costs compared to other major economies may be decreasing. The IPPR attributes this potential shift to growing market confidence in the government's fiscal plans, particularly Chancellor Rachel Reeves' announcement to increase financial headroom. UK gilt yields have been higher than peers due to a perceived "credibility problem" regarding fiscal policy adherence, costing taxpayers billions annually. Despite stronger economic fundamentals compared to some nations with lower borrowing costs, the UK's history of inconsistent fiscal policy, exemplified by the 2022 mini-budget, has fueled market skepticism. However, the recent autumn budget has shown signs of easing the UK's borrowing premium, indicating a positive market response to the government's approach.

Key Entities & Roles

Key Player Opposition Context

Japan 40% Labour Party 50% United States ×250% UK ×460% Institute for Public Policy Research (IPPR) ×270% Rachel Reeves 80%

Keywords

borrowing costs 100% government bond yields 80% fiscal policy 80% uk economy 70% debt-to-gdp ratio 60% inflation 50% interest rates 50% financial headroom 50% credibility problem 40% autumn budget 40%