UK Debt Grows At Fastest Rate Among Wealthy Nations Pushing Economy Toward Doom Loop

The United Kingdom’s national debt is swelling at a rate unmatched by any other advanced economy, according to new analysis by Oxford Economics. Over the last two decades, successive governments have fuelled a prolonged borrowing binge that threatens to tip the country into a damaging doom loop. The UK’s debt has nearly tripled since 2005, soaring to a staggering £2.9 trillion—almost the size of the entire economy. The nation now pays more than £100 billion annually just in interest payments alone.

This trajectory stands in stark contrast to fiscal discipline seen in other affluent countries. Only Spain and the United States have recorded debt increases anywhere close to Britain’s over the same period. Meanwhile, Germany, Switzerland, and the Netherlands have all managed to reduce their debt relative to GDP. Economists warn that the UK’s rapid accumulation of debt is a prime driver of the elevated yields seen on government bonds, which continue to unsettle investors and increase government financing costs.

The situation comes at a precarious time for Chancellor Rachel Reeves as anticipation builds for the upcoming Budget. City analysts forecast a fiscal event akin to last year’s unprecedented £40 billion tax increase, with expectations of further heavy borrowing. Many economists warn the UK risks entering a vicious cycle, where high debt servicing costs and sluggish economic growth force tax rises, in turn constraining the economy and necessitating successive rounds of tax increases.

Despite lower overall debt levels than some peers, the UK already faces steeper borrowing costs than countries like France and the US. This reflects a broader concern among investors about the sustainability of the nation’s public finances. Senior market figures such as Matthew Beesley, chief executive of Jupiter Fund Management, have urged bold and decisive action to restore confidence and stability. Piecemeal fixes, Beesley cautions, will only sustain uncertainty and leave the government beholden to the bond market’s whims.

Recent volatility in gilt markets underlines these fears. The cost of 30-year borrowing briefly touched its highest level in 27 years, surging past 5.7 percent, while yields on 10-year gilts hover near their peaks from the 2008 financial crisis. The government and Bank of England now rely on private investors to finance a further £200 billion in borrowing during the coming year. Without clearer fiscal discipline, experts suggest that yields and investor anxiety will remain elevated, reigniting budgetary fears every autumn.

Some critics argue that Britain’s political system has failed to impose long-term fiscal responsibility. The erosion of the fiscal framework means debt-to-GDP has strayed far from a sustainable path. Economists and investors alike are now looking towards the Chancellor’s Budget as a moment for decisive action to prevent the UK slipping any further towards a debt-driven spiral, which would threaten economic growth and the nation’s financial stability for years to come.