15 May 2026 , 21:41
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The benchmark UK borrowing cost has reached a new high reminiscent of the financial crash era as Prime Minister Sir Keir Starmer faces a potential leadership challenge from Manchester Mayor Andy Burnham.
The interest rate investors demand on 10-year loans to the state, known as bonds, hit 5.168%, surpassing a previous decade-long high set on Tuesday.
Not since June 2008 has the government borrowing cost been so high.
Major global economies, such as the US and Germany, have also seen borrowing price increases in recent weeks due to inflationary fears triggered by the war in Iran.
Oil and gas supply disruption has made energy more expensive, sparking fears of a new round of inflation and higher interest rates as a result.
While the country is more exposed to energy price shocks due to its reliance on imports of oil and gas, it appears the challenge by Mr. Burnham is fueling this sharp rise.
Mr. Burnham issued a statement on Thursday night saying he would seek permission from the Labour Party to stand in the Makerfield by-election to return to parliament, with the incumbent Labour MP making way for him.
It is thought that he intends to launch a leadership bid to oust Sir Keir as prime minister once he is back in the House of Commons.
From the end of trading on Thursday night to Friday afternoon, the 10-year bond yield, the interest rate investors demand to lend to the state, rose 3.5%, a steep increase for bonds.
Longer-term borrowing costs, too, saw significant increases and surpassed recent highs, reaching 5.84%.
The last time the interest rate on 30-year bonds was this high was May 1998.
Why?
Investors seeking a higher return to lend to the UK signify greater concern about its ability to repay debts.
Questions around who will lead the country, what support they may have, and what their policies may be can contribute to the perception of risk.
Mr. Burnham said last year the country had to put behind it the idea of "being in hock to the bond markets".
Politics Editor