After reaching their lowest point since Oct. 2024 before the invasion, yields on 10-year U.K. government bonds have now soared to their highest since the 2008 financial crisis.
Deutsche Bank has estimated that the increase has already stripped between £7 billion and £10 billion from the chancellor’s £23.6 billion fiscal headroom.
“The costs of borrowing for government have gone through the roof,” Reeves noted in the interview. “This country hasn’t done anything to cause those prices to rise, but the decision of Donald Trump, the decision that Keir Starmer and this government did not want any part of and are trying to de-escalate, is causing real hardship for people now.”
“I think that people can see that what Trump has done in the Middle East is going to cause economic challenges all around the world, with potentially higher inflation, weaker growth and weaker tax receipts,” she added.
The Middle East war is the latest episode that has put Europe at odds with Trump’s America. Earlier Wednesday, Starmer said the “volatile” international situation requires Britain to build a closer relationship with the EU.
The invasion came as Reeves was making a push to bring steadiness to economic policy, deciding to make no major announcements in her spring statement last month in a bid to keep markets calm.
“We’ve got a grip of public spending,” said Reeves. “Yes, we’ve had to increase taxes, but as a result, we now have that stability.”