Chancellor Rachel Reeves' economic plans are under threat following a global market shock from Donald Trump's tariff proposals, which have increased UK government borrowing costs. The yield on 10-year UK gilts has surged, influencing investor confidence and raising concerns over Labour's fiscal commitments. Additionally, a report from the Office for Budget Responsibility indicates that recent spending changes have heightened the UK's vulnerability to future shocks, predicting a significant rise in the debt-to-GDP ratio. The overall market response has resulted in a depreciating pound and escalating gilt yields, signaling a tightening fiscal environment.
Chancellor Rachel Reeves has been warned that her economic roadmap may need to be 'ripped up' as a global market shock triggered by Donald Trump's new wave of tariff threats drives up UK government borrowing costs and rattles investor confidence.
Trump's move comes just as Reeves had begun implementing Labour's fiscal agenda, which includes a commitment to ramp up public investment. But the sudden tightening of fiscal conditions could derail those ambitions.
A new report from the Office for Budget Responsibility (OBR) warned that Reeves' recent U-turns on spending restraint had left the UK more exposed to future economic shocks, with Britain's debt-to-GDP ratio projected to skyrocket to 270% by the early 2070s.
The pound is down against all major currencies. Gilt yields are now spiking above Liz Truss levels - this is serious. The Chancellor's fiscal headroom is shrinking by the hour.
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