The pound has fallen to $1.21, its lowest value against the dollar since November 2023, amid rising government borrowing costs. The yield on the UK’s 10-year gilt, a benchmark for government borrowing, has climbed to 4.86%, the highest in 17 years, while the 30-year gilt reached 5.42%, the highest level since 1996. Borrowing costs are rising globally, but some experts argue the UK’s Budget measures have exacerbated inflationary pressures, making the country particularly vulnerable.

Global factors, such as strong US job data and the re-election of Donald Trump, have added to concerns about persistent inflation and sustained high interest rates. However, critics claim domestic policies are fuelling the UK’s challenges. Measures announced in the Budget, such as the increase in employer National Insurance contributions, are seen as stifling business growth and pushing up costs, with warnings of potential job losses and price increases.

Chancellor Rachel Reeves has faced scrutiny over her handling of the situation, including her recent trip to China to secure economic agreements worth £600m over five years. Prime Minister Sir Keir Starmer expressed "full confidence" in Reeves, reaffirming the government’s commitment to fiscal rules. However, opposition leaders and businesses have criticised Labour’s economic approach, claiming it has dented market and business confidence.

While the government aims to drive growth, recent figures show stagnation in the UK economy. Efforts to position the UK as a global leader in artificial intelligence were announced, but critics dismissed the plans as lacklustre. Businesses have urged policymakers to balance growth ambitions with measures that support employment and address rising inflation.