Britain’s wake-up call

Rising borrowing costs are a warning of the perils of delaying reform

Today on Arguably, I explore how the UK can solve its bond market problem. This piece is paid but you can read it now by becoming a full subscriber for just £6 a month or signing up for a seven-day free trial.

(Pandora Pictures/Shutterstock)

“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter,” James Carville, Bill Clinton’s former chief strategist, observed back in 1993. “But now I would want to come back as the bond market. You can intimidate everybody.”

At present, there is no major western economy in which this is more true than the UK. Britain’s 10-year bond yields – or the interest that investors charge in return for lending – are the highest of any G7 country at over 5 per cent.

That reflects an array of economic woes: stubborn inflation of 3.3 per cent, which has slowed the pace of interest rate cuts, and an overreliance on energy imports (43.8 per cent of total use), which leaves Britain unusually exposed to the fallout from the Iran War. One No 10 aide puts a provocative question to me: why would any of Keir Starmer’s challengers want to inherit this situation?