Rising Gilt Yields Threaten UK Growth Plan

The UK government's growth plan is facing challenges due to rising gilt yields. The UK 10-year gilt yield has reached around 5.16%, a level not seen in nearly two decades, making every new spending commitment more expensive and reducing the government's room for supporting growth without increasing borrowing pressure.

Chancellor of the Exchequer Healey announced a £150 million British Business Bank fund for fast-growing companies and university spinouts in northern England. However, this amount is small compared to the size of the UK economy and public finances.

The government's fiscal policy has limited freedom due to high gilt yields, which are already affecting mortgage rates. Major lenders have increased some fixed-rate products, making higher household borrowing costs more likely.

Healey argued that controlling costs and removing barriers to investment would help create conditions for stronger private-sector growth, but the Budget will need to provide numbers behind this argument.