As the UK grapples with a market crisis that has pushed government borrowing costs to their highest level since the 2008 financial crash, Rachel Reeves, the Chancellor, is facing mounting pressure to cancel her trip to China. The pound tumbled to a nine-month low against the dollar on Wednesday, as UK 10-year borrowing costs climbed above 4.8 percent. Both Conservative and Liberal Democrat MPs have demanded Reeves abandon the long-planned China visit to address the escalating financial turmoil at home.



The Chancellor is due to fly to Beijing this weekend amid growing alarm over plunging sterling and surging bond yields that threaten to wipe out her fiscal headroom. Reform UK MP Richard Tice warned Parliament: "We are heading towards, be under no illusion, a financial crisis." Economists warn that the market turmoil could force the Chancellor into emergency tax rises or spending cuts, with her £9.9 billion fiscal headroom at risk of being completely erased. The yield on 30-year gilts surged to 5.36 percent, reaching its highest level since 1998.

The FTSE 250 index dropped by two percent on Wednesday - its steepest one-day decline since last August. Brad Bechtel, global head of foreign exchange at Jefferies, said the UK was seeing a "micro version" of the 2022 bond market meltdown witnessed after Liz Truss's mini-budget. "The pound seems to be reacting to gilts more and more and that means we are spilling further and further into fiscal emergency territory," he warned.

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Deputy Leader of Reform UK Richard Tice
PA

Shadow Chancellor Mel Stride led fierce criticism of Reeves in the Commons, demanding: "Where is the Chancellor? It is a bitter regret that at this difficult time with these serious issues she herself is nowhere to be seen." Former Treasury minister Dame Harriett Baldwin accused Reeves of having "fled to China" rather than explain how she would help the UK's "flatlining" economy.

Outside the chamber, Liberal Democrat leader Sir Ed Davey said Reeves should cancel her trip to China and make an emergency statement to Parliament. He said: "Instead of jetting off to China, the Chancellor should urgently come before the House of Commons to cancel her counterproductive jobs tax and set out a real plan for growth. The country is paying an ever-higher price for the total mess the Conservative Party made of our economy, and the Chancellor needs to realise that she’ll never dig us out of this hole without a far more ambitious plan to grow our economy, including rebuilding trade with Europe."

Reform UK's deputy leader Richard Tice urged the Government to ask Reeves to "return from her ridiculous trip" given that the pound was "almost collapsing." The Treasury defended Reeves' China visit, with Chief Secretary Darren Jones telling MPs he would not ask her to return from the "important" trade mission. A Treasury spokesperson insisted: "No one should be under any doubt that meeting the fiscal rules is non-negotiable and the Government will have an iron grip on the public finances. They added that the Chancellor would "leave no stone unturned in her determination to deliver economic growth and fight for working people."

Jones argued that financial market movements are determined by "a wide range of international and domestic factors" and that recent market shifts have been "largely driven by data and global geopolitical events." The Treasury also dismissed speculation about fiscal headroom as "pure speculation."

An intervention by the chancellor to help shore up flagging financial market confidence in the UK economy has been ruled out by the government, amid further declines in the value of the pound. Sterling fell to its lowest level against the dollar since November 2023 early on Thursday, building on recent losses. A toxic cocktail of concerns include budget-linked flatlining growth, rising unemployment and the effects of elevated interest rates to help keep a lid on rising inflation. They have also been borne out by a leap in UK long-term borrowing costs, which hit levels not seen since 1998 earlier this week.

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It piles pressure on the chancellor because it signals that investors are demanding greater rewards in return for holding UK debt, adding unwelcome costs to Ms Reeves who is borrowing money to invest in public services in addition to the budget tax burden on business and the wealthy. The Tories were granted an urgent question in the Commons this morning which urged her to account for the shift in the market reaction to her budget, which critics have warned will only harm investment, jobs, pay and lead to higher prices. Treasury minister Darren Jones, who was sent to reply on her behalf, told MPs there were no plans for further commentary beyond a Treasury statement issued on Wednesday which defended the government's approach.

Shadow chancellor Mel Stride urged Ms Reeves to cancel her forthcoming, and long-planned, trade trip to China to allow for a change of course to recover market confidence. He claimed Britons are having to "pay the price for yet another socialist government taxing and spending their way into trouble." Mr Jones responded that he would take no lessons on managing the economy from the Conservatives.

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Why is Rachel Reeves flying to China?
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Liberal Democrat leader Ed Davey demanded an emergency fiscal statement to parliament that cancelled the planned hike to employers' national insurance contributions in April to boost economic growth and bring interest rates down. In addition to the strain on sterling over Mr Reeves's tax and spending plans, the effect on the pound has been intensified by a strengthening dollar due to shifting market expectations of fewer US interest rate cuts this year. Sterling is trading at $1.22 - a level last seen in November 2023. The spot rate had stood as high as $1.34 in September.

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1:18
Investors 'losing confidence' in UK
It has also fallen sharply however against other countries' currencies. The pound is a cent down versus the euro at €1.19 on the start of the week, falling six tenths of a cent in today's market moves. Long-term bond yields, which reflect perceived risk, hit their highest level since 1998 this week and other benchmark gilt yields are heading north too. Please use Chrome browser for a more accessible video player
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Additional borrowing costs make it more expensive for Ms Reeves to service the debt she is taking on. It may mean she faces a choice between more tax rises - something she had previously ruled out - or spending cuts as higher borrowing costs take their toll. The Treasury said in its statement: "No one should be under any doubt that meeting the fiscal rules is non-negotiable and the Government will have an iron grip on the public finances. UK debt is the second lowest in the G7 and only the OBR's forecast can accurately predict how much headroom the government has - anything else is pure speculation. Kick-starting economic growth is the number one mission of this Government as we deliver on our Plan for Change. Over the coming weeks and months, the Chancellor will leave no stone unturned in her determination to deliver economic growth and fight for working people."

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But Matthew Ryan, head of market strategy at global financial services firm Ebury, said of the market moves: "This is a damning indictment of Labour's fiscal policies, particularly the hike to employer NI (National Insurance) contributions, which businesses have already warned will lead to higher prices and a worsening in labour market conditions. We see wide ranging repercussions of this bond market sell-off. On the one hand, weak demand for UK debt raises the risk of either government spending cuts or further tax hikes to balance the country's finances, neither of which would be positive for growth. Elevated gilt yields are also likely to be reflected in higher mortgage rates, which would provide a further squeeze on household disposable incomes. These worries have placed a high premium on

Rachel Reeves is facing mounting pressure to cancel her trip to China amid market chaos, with both Conservative and Liberal Democrat MPs demanding she abandon the long-planned visit to address the escalating financial turmoil at home. The Chancellor is due to fly to Beijing this weekend amid growing alarm over plunging sterling and surging bond yields that threaten to wipe out her fiscal headroom. Reform UK MP Richard Tice warned Parliament: "We are heading towards, be under no illusion, a financial crisis." Economists warn that the market turmoil could force the Chancellor into emergency tax rises or spending cuts, with her £9.9 billion fiscal headroom at risk of being completely erased. The yield on 30-year gilts surged to 5.36 percent, reaching its highest level since 1998.

The FTSE 250 index dropped by two percent on Wednesday - its steepest one-day decline since last August. Brad Bechtel, global head