Great Britain in a debt trap. Markets lose patience
The British debt is growing at a dizzying pace, the bonds dive, and investors lose confidence in the public finances of the United Kingdom.
Great Britain was in a serious financial crisis. Despite the next interest rate discounts by the Bank of England, the profitability of 30-year government bonds has achieved 5.75 percent – At most since 1998. This is a clear signal that investors require a higher and higher bonus for the risk of financing British public debt.
Treasury papers
Just a year ago, long -term tax papers paid 4.4 percent, at the beginning of 2025 over 5 percent, and in April exceeded 5.5 percent. Current levels are unheard of in the career of many investors younger than 50 years. What’s more, increasing profitability occur simultaneously with reductions in short -term interest rates – in August the central bank cut down to 4 %, for the fifth time during the year. Instead of a decrease in the interest rate of long -term bonds, however, we have the opposite effect.
The reason is the loss of trust in the stability of British finances. The country’s debt is about 96 percent GDPand public expenses exceed 44 percent GDP to 40 percent before Pandemia. The deficit has been around 5 percent for five years. GDP, and official forecasts indicate a further increase in expenses. If this trend continues, by 2073 a public debt can even reach 274 percent GDP.
The Keira Starmer government avoids radical reforms. An example was the withdrawal from the limitation of social expenses, which caused negative reactions of the market. Tax increases introduced by the Labor Party – including Higher burden on work and capital gains – they turn out to be insufficient. The announced increase in property tax can additionally hit the middle class.
Stagflation
Fiscal problems coincide with economic recession. Great Britain is struggling with stagflation – CPI inflation increased in July to 3.8 percent, and unemployment to 4.7 percent, at most for four years. Industrial production decreases – in the first half of 2025 the country has produced the least cars since 1953 (except for Pandemic 2020).
The crisis on the debt market is not only a British problem. High and rapidly growing public debt also applies to the USA, Germany, Japan or France. The profitability of 30-year bonds in many countries achieve levels that have been unpapped for several years. Investors are increasingly wondering who in the future will repay growing debts and how much money will be worth the rule that will return.
