Proactive Investors - The UK is on track to incur the highest debt interest costs in the developed world this year as persistently high inflation and an unusually large proportion of government bonds linked to price rises damage the public finances, according to a new report.
Credit ratings agency, Fitch, estimates the Treasury will spend £110bn on debt interest in 2023, which at 10.4% of total government revenue, would be the highest level of any high-income country.
It would be the first time the UK has topped the data set which goes back to 1995.
Roughly a quarter of UK government debt is in the form of so-called index-linked bonds, whose payouts fluctuate in line with inflation, making the country a huge outlier internationally.
Italy has the next highest share with 12% of its bonds tied to inflation, while most countries have less than 10%.
“We’ve had a very large inflation shock which is adversely affecting the public finances and that is obviously a key driver of the sovereign credit rating,” said Ed Parker, global head of research for sovereigns and supranationals at Fitch.
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