The UK is facing a serious threat of a debt crisis as the pace of public borrowing growth reaches a critical level by the end of the year. Experts predict that by September, the national debt of the United Kingdom will exceed the symbolic threshold of £3 trillion for the first time.
Currently, the financial burden is increasing at a rate of £7,500 per second, which is equivalent to £27 million per hour or £650 million per day. Such a rapid deterioration in indicators is linked to the prolonged aftermath of the global financial crisis, the period of pandemic lockdowns, and colossal energy subsidies. This was reported by The Telegraph.
To understand the scale of the problem, analysts provide the debt burden per capita. In 1997, under Tony Blair's government, the share of national debt was just under £6,000 per person. By 2010, this figure had risen to £16,400, and today the obligations of each citizen have reached £42,000. According to current forecasts, by the end of the decade, the amount will approach £50,000 per capita. The ratio of national debt to GDP in the UK is expected to exceed 96% in the coming years.
Such a level of debt burden was last recorded in the early 1960s when the kingdom was repaying loans accumulated during World War II. However, former member of the Office for Budget Responsibility David Miles points to a key difference: in the past, the century-long debt was gradually reduced due to cuts in military spending, whereas now the trajectory is solely upward due to an aging population and increased defense spending.
Current Chancellor of the Exchequer Rachel Reeves is attempting to stabilize the situation through a large-scale austerity program and a £40 billion tax increase. At the same time, she has increased current government spending by about £70 billion per year, which requires new borrowing and leaves the government with very little room for maneuver.
Additional pressure on financial markets is exerted by domestic political instability. Amid rumors of a possible fall of Keir Starmer's cabinet, investors are concerned about the rise of Andy Burnham, the leading contender for the leadership of the Labour Party. His statements about expanding state control and reluctance to be "in debt" to the bond market have already led to an increase in borrowing costs for London.
Former Deputy Governor of the Bank of England Sir Charlie Bean emphasized that it is much more expensive for the UK to borrow funds today than for the US or EU countries, as demand from traditional investors, such as pension funds, is declining, and about 30% of bonds are now dependent on volatile foreign hedge funds.
In the current circumstances, authoritative economists have begun to openly discuss a scenario that just recently seemed unthinkable - London turning to the International Monetary Fund (IMF). Harvard professor Kenneth Rogoff believes that the likelihood of launching a technical support program from the IMF is increasing, as there are no obvious prospects for economic growth in the UK, and the political elite shows a reluctance to implement deep structural reforms.
Experts draw alarming parallels between the current situation and historical examples, such as François Mitterrand's large-scale leftist economic experiment in France in 1982, which ended in a severe crisis and forced spending cuts.
If the British authorities cannot reverse the negative trend, the country will have to resort to unconventional financial measures, including controlled inflation growth to devalue debt or the introduction of strict regulatory restrictions on private capital.
