By Mark McSherry

The UK’s Debt Management Office (DMO) has raised the UK government’s net financing requirement for the current 2024-25 fiscal year to £299.9 billion, up from April’s estimate of £277.7 billion.

As a result, the DMO’s forecast for total gilt sales over the fiscal year has been revised upwards by £19.2 billion pounds to £296.9 billion.

The announcement came after UK finance minister Rachel Reeves delivered the government’s budget.

Abrdn investment director Matthew Amis said gilts will “struggle to fully unwind the ‘Budget premium’ built up over recent weeks …

“The extra long gilt issuance is catching the market off-guard.”

Sanjay Raja, chief UK economist at Deutsche Bank, said: “Today’s Budget signals a lot more gilt issuance to come, relative to previous expectations … In the end, markets will have to grapple with higher borrowing.”

The UK’s Office for Budget Responsibility (OBR) said the dudget increases spending by £70 billion annually, “with two-thirds on current and one-third on capital spending.”

The OBR said half of this spending is funded through tax increases which raise £36 billion annually and push the tax take to a record 38% of GDP.

“The rest is funded by £32 billion more borrowing annually which temporarily boosts GDP growth to 2 per cent in 2026, but leaves output unchanged in the medium term,” said the OBR.

“New fiscal rules, to balance the current budget and get net financial liabilities falling relative to GDP in five years, are met by small margins of £10 and 16 billion respectively.”