Reeves to Lose £3 Billion of Fiscal Buffer Amid Gilts Selloff

The surge in UK gilt yields on the back of the Iran war could cost Chancellor of the Exchequer Rachel Reeves more than a 10th of her fiscal buffer by increasing the cost of servicing government debt, according to Bloomberg economists.

Financial market moves since Feb. 27, the day before the US and Israel attacked Iran, have erased about £3 billion ($4 billion) of Reeves’ cushion against the rule requiring her to cover day-to-day spending with taxation, according to Bloomberg Economics calculations based on Friday prices. In the forecast it delivered at the start of March, the UK fiscal watchdog estimated the Chancellor’s fiscal headroom at £23.6 billion.