At the same time, the UK government is wrestling with an unprecedented national debt of around £2.9 trillion. This monumental number underscores the continued financial strain from the 2008 financial crisis and the Covid-19 pandemic. This debt equals the country’s annual gross domestic product (GDP). It builds in substantial precedent for increased future borrowing and undermines long-term economic stability. The recent borrowing picture notwithstanding, the government has borrowed £152.6 billion in the latest full financial year that ended in March 2025. Simultaneously, debt service costs which were expected to be £3.4 billion by November 2025, skyrocketed.
UK government bonds, known colloquially as “gilts,” are the main tool in the landscape of UK borrowing. To investors, these ʺcircular securitiesʺ are timely and low‐risk investments. This quality renders them attractive to a wide array of financial institutions, including pension funds, investment funds, banks, and insurance companies. The unabated demand for gilts is indicative of investors’ confidence in the UK government’s repayment capacity. This confidence holds firm, despite a drop in borrowing.
Though increased national debt is cause for concern. The debt has more than doubled in recent decades. Current levels are now over two and a half times what we saw back in the 1980s. This boom lasted until the fiscal crisis struck in 2008. In November 2021, public sector net borrowing was £7.4 billion. It peaked at £13.6 billion in November 2024 before falling marginally to £11.7 billion in November 2025. This new trend points to the bright and dark fiscal futures ahead for the federal government.
Many economists — on both the right and left — have dinged the UK’s course of borrowing, especially against the backdrop of expected long-term interest rate hikes. Yet some analysts are cautioning that these changes could prevent the government from being able to fulfill its own borrowing goals. In response to these concerns, Chancellor of the Exchequer Rachel Reeves has provided assurances. She changed the definition of debt used for fiscal targets, which now gives them room to invest more capital.
These signs of strain have been met with unwavering protestations from Downing Street that the government remains committed to sound money.
“There is no doubt about the government’s commitment to economic stability.” – Downing Street
Our current levels of UK government debt, though acute, are lower than for most of the last century. They highlight a pressing issue for policymakers as they navigate the delicate balance between borrowing for investment and ensuring fiscal responsibility.
Going forward, the federal government should be vigilant about the debt levels and borrowing behavior. UK government debt is in near-continuous flux. That means continuous assessment and smart planning to mitigate risks from increasing interest rates and a possible recession. Impact on new financial institutions pipeline Financial institutions are currently in the market purchasing gilts. How confident they are will be key to the UK public finances’ future.