UK Government Borrowing Costs Rise Amid Global Economic Uncertainty

The UK government's borrowing costs have risen as investors grow increasingly nervous about the country's economic prospects. The rising costs come amid a backdrop of global economic uncertainty, with oil prices under pressure due to tensions in the Strait of Hormuz.

UK gilt yields increased sharply in July as investors priced in the risks associated with further disruptions to oil supplies through the Strait of Hormuz. Yields were also pressured by concerns over new Prime Minister Andy Burnham's willingness to adopt a more flexible approach to fiscal rules, alongside a planned cost of living support package.

The Bank of England (BoE) kept interest rates unchanged in July, adopting a wait-and-see approach. Markets are pricing in just a 30% probability of a rate rise this year following central bank guidance that rates are unlikely to increase in the near term.