London Daily

Focus on the big picture.
Sunday, Jun 28, 2026

Pound falls to 37-year low as cost of servicing government debt hits August record

Pound falls to 37-year low as cost of servicing government debt hits August record

The chancellor responds to the latest borrowing figures by insisting it is "absolutely right" that the government takes action to help families and businesses bear down the cost of living crisis.

The pound has fallen to a 37-year low against the dollar after figures showed that the cost of servicing UK government debt last month hit a record high for August - before Liz Truss came to power with promises to splash the cash.

The Office for National Statistics said that interest payments were £8.2bn last month. That was £1.5bn more than a year earlier and the highest August figure since monthly records began in 1997 as it included the effect of rising inflation.

Many government bonds are linked to the Retail Prices Index measure, which was 12.3% that month.

The payments meant that public sector borrowing was £11.82bn, far more than the £8.5bn forecast by economists.

There is concern that taxpayer-funded energy aid for households and businesses, coupled with the promise of tax cuts to spur growth, is damaging investor confidence.

A Reuters poll of bond strategists and economists, carried out last week, suggested that 55% believed there was a high risk that confidence in British assets, including government bonds, would deteriorate sharply in the next three months.

The pound has lost 7% of its value against the dollar in the past three months. Sterling was trading at its lowest level against the dollar since 1985 early on Tuesday at $1.1349.

Most of the decline this year can be explained by the global rush towards the dollar in times of uncertainty, but Ms Truss's plan to subsidise energy bills is tipped to come in at about £150bn.

Bas Van Geffen, a strategist at Rabobank, said: "Trust is fleeting... and Truss would be wise to reassure markets that she has a plan to pay for these expenditures."

Kwasi Kwarteng, the chancellor, who is expected to outline a mini-budget called "The Growth Plan" on Friday, has insisted that Britain has more room to borrow than other countries as they have a bigger share of public debt to economic output.

The government believes that kick-starting growth is the best way to get stronger tax revenues.

Mr Kwarteng said in reaction to the public borrowing figures: "Our priority is to grow the economy and improve living standards for everyone - with strong economic growth and sustainable public finances going hand in hand.

"As chancellor, I have pledged to get debt down in the medium term. However, in the face of a major economic shock, it is absolutely right that the government takes action now to help families and businesses, just as we did during the pandemic."

Newsletter

Related Articles

0:00
0:00
Close
UK Government Confirms Further Medicine Price Concessions for Community Pharmacies in June
British Chambers of Commerce Calls for Public Procurement Reform to Boost Regional Growth
Thousands Mark Armed Forces Day Across the United Kingdom With National Parades and Flypasts
Man Arrested in Ealing on Suspicion of Attempted Murder After Vehicle Ramming Incident Injures Five
Cambridge South Station Opens With £250 Million Investment to Strengthen Life Sciences Corridor
UK Heat-Health Alerts Extended Across England as High Temperatures Persist
Thames Water and Energy Operators Warn of Peak Demand Risks During UK Heatwave
Government Conference Highlights Push for Evidence-Led Policy Across UK Public Sector
Insolvency Service Reports Improved Confidence in UK Insolvency System
Security Industry Authority Finds Widespread Safety Failures in UK Night-Time Economy
Nigel Farage Expands Anti-WHO Campaign Into United States With New Lobbying Structure
Home Secretary Seema Mahmood Unveils New Safe Routes Plan for Asylum Seekers
UK Government Warns of Peak Electricity and Water Pressure Amid Ongoing Heatwave
New Nuclear Plant in Wales Named Gwyndod Power Station as Energy Strategy Advances
UK Announces First Major Hydropower Projects in Four Decades to Expand Renewable Capacity
Thirteen Men Charged in Major UK Sexual Abuse Case as Investigation Continues
UK Launches Cross-Sector Climate Security Taskforce Linking Environment and National Security
UN Secretary-General António Guterres Calls for Urgent Global Methane Emissions Cuts in London
World Bank Approves $1 Billion UK-Backed Financing Package for Ukraine Recovery
UK Pledges Emergency Aid and Rescue Team Deployment to Earthquake-Hit Venezuela
Bank of England Holds Interest Rates at 3.75 Percent for Fourth Straight Meeting
Record-Breaking Heatwave Puts Strain on UK Health Services and Energy Networks
London Ambulance Service Sees Record Emergency Demand as Heatwave Intensifies
British Chambers of Commerce Warns of Prolonged Weak Investment Climate Through 2027
Bank of England Holds Interest Rates as Inflation Risks Persist
UK Construction Sector Faces One Percent Contraction Amid Cost and Investment Pressures
Former DUP Leader Sir Jeffrey Donaldson Convicted of Sexual Offences
Church of England Appoints Dr Linsay Cunningham to Lead Faith and Public Life Division
UK Armed Forces Day Marked Nationwide With Events From Aberdeen to the Scilly Isles
Rising Tensions in Edinburgh Prompt Joint Warning From Scottish Local Government Leaders
UK Construction Sector Forecast to Contract One Percent in 2026 on Cost Pressures
UK Parliament Backs 87 Percent Emissions Cut as Government Deepens Electrification Drive
British Chambers of Commerce Forecast Weak UK Growth as Investment and Demand Slow
Bank of England Holds Interest Rates at 3.75 Percent Amid Energy and Inflation Uncertainty
London Ambulance Service Reports Record Surge in Life-Threatening Emergency Calls During Heatwave
UK Parliament Approves Legally Binding 87 Percent Emissions Cut Target by 2040
United Kingdom Records Third Consecutive Day of Record June Heat as Europe Faces Worsening Heatwave
Robert Jenrick Defends £5 Million Donation to Nigel Farage Amid Political Scrutiny
Plymouth Museum The Box Wins 2026 Art Fund Museum of the Year Award
UK Government Faces Backlash Over Plans to Use Former Military Sites for Asylum Accommodation
Labour Party Faces Pressure Over Cabinet Stability as Senior Figures Clash on Policy Direction
Heathrow Airport Forecasts Passenger Decline in 2026 as Costs and Climate Disruption Mount
UK Energy Regulator Approves Expansion of Long-Duration Storage to Boost Power System Resilience
Crown Estate Reports Third Consecutive Year of £1 Billion Profit as Debate Over Royal Finances Intensifies
Teenager Charged With Murder in Wales Following Death of 14-Year-Old Boy
Nottingham University Hospitals Maternity Failures Trigger Calls for Public Inquiry Into Patient Safety
EasyJet Rejects £4.9 Billion Takeover Offer From Castlelake but Keeps Door Open for Further Talks
Record Heatwave Triggers UK Transport and Infrastructure Strain as Heathrow Revises Passenger Forecast Downward
Ofgem Approves Sixteen Long-Duration Energy Storage Projects to Strengthen UK Grid Stability
Labour Government Faces Internal Tensions Over Cabinet Decisions and Net Zero Policy Direction
×