Debt chief warns scale of UK borrowing brings risks

The UK Debt Management Office chief executive Robert Stheeman told Reuters in an interview that Britain faces risks and challenges from the sheer scale of borrowing it will need in the coming years.

“We are facing gilt remits well in excess of 200 billion pounds annually,” Stheeman told Reuters.

“The sheer numbers are going to be very big and that must bring risks, that must have challenges.”

In this financial year alone, the UK Debt Management Office must raise £265 billion, the second highest amount on record.

Two gilt auctions this week both recorded the highest demand since 2020, and the second highest since 1997.

Stheeman is due to step down at the end of June after more than 21 years in the post. His successor has yet to be named.

Stheeman said the UK was not alone with its high debt issuance and the job of selling it had been made easier by the increase in liquidity in the bond market since his early days in charge of the DMO.

Last month, the Organisation for Economic Cooperation and Development (OECD) said it expected total bond debt owed by its member governments to rise to $56 trillion this year from $54 trillion in 2023.

The United States will represent roughly half of this debt, twice its share in 2008, while the European Union will account for 20%, Japan for 16% and the UK for 6%, the OECD said.

“From the perspective of where I sit as a debt manager, you never want to be an outlier,” Stheeman said. “Debt to GDP ratios in developed western OECD economies have all been on an upward trajectory.”

In late 2023, foreign investors held just over 30% of UK government bonds, up from 18% when Stheeman started in 2002.

Reuters said UK “general government debt ” is forecast to reach 103.8% of gross domestic product in 2026, up from 100% late last year and the highest since 1958.

On March 21 the UK’s Office for National Statistics (ONS) said UK central government borrowing in the financial year-to-February 2024 was £106.8 billion.

The ONS said UK public sector net debt excluding public sector banks now stands at £2.659 trillion — that’s £157.4 billion more than at the end of February 2023.

For February, the interest payable on central government debt was £6.8 billion.

The Office for Budget Responsibility (OBR) now forecasts that UK central government debt will “settle” at £114.1 billion for the financial year ending March 2024 as a whole.