In June this year, the UK attracted £110 billion of bids on bonds worth £8 billion – offering evidence that the country remains an attractive destination for investors seeking a safe haven.
The auction of government bonds was over 10 times oversubscribed, with fund managers lining up to lend to the UK.
In the financial year ending July 2024, the government borrowed £51.4 billion, which was £500 million less than during the equivalent period of the previous financial year, but £4.7 billion above OBR (Office for Budget Responsibility) forecasts in March 2024.
While this deficit may force the Chancellor Rachel Reeves to hike taxes or reduce spending in her October budget, it hasn’t overly alarmed investors. While she is continuing to apply the fiscal rules set by her predecessor to commit to reducing debt as a share of GDP (gross domestic product) in five years, she has also said it would be reasonable for the government to borrow to invest.
Analysts have said that the large demand for UK debt is partly driven by expectations that the Bank of England will retain higher interest rates than either the Federal Reserve or the European Central Bank. Experts have also cited a fall in pensioner life expectancy as another factor fuelling record demand for government bonds.
With falling life expectancies in retirement, it has been claimed that UK pension funds have been rushing to purchase 15-year bonds, instead of 25-year bonds, in order to realise their investment gains sooner.
If you are retirement planning in Cheshire, call financial consultants Hartey Wealth Management today to discuss investment options.
