Pound falls further as UK borrowing costs soar

Prime Minister Rachel Reeves added, “We will remain steadfast in our determination to achieve economic growth and fight for workers.”

The government said Wednesday it would have no comment ahead of the independent forecaster's official borrowing forecast, due in March.

Shadow chancellor Mel Stride claimed in the autumn budget that Reeves' significant spending and borrowing plans were “making borrowing more expensive for the government”.

“We need to build a more resilient economy, not raise taxes to pay for fiscal incompetence,” he wrote in a post on X.

The pound continued to fall on Thursday, down 0.9% against the dollar at $1.226 and borrowing costs rising further.

The pound usually rises when borrowing costs rise, but economists said it had fallen amid growing concerns about the health of the British economy.

Governments typically spend more money than they raise in taxes. You borrow money to fill this gap, but you have to pay it back with interest.

One way to borrow money is to sell financial products called bonds.

“It’s not good news,” Mohamed El-Erian, chief economic adviser at asset manager Allianz, told the BBC’s Today programme.

He said rising borrowing costs mean the government will pay more interest on its debt and “have to spend more of its tax revenue and invest less in other things.”

El-Erian added that economic growth could also slow, which could “reduce profits.”

“If this continues the Prime Minister will either have to increase taxes or cut spending further. That will affect everyone,” he said.

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