The pound has dropped to its lowest level in nine months after government borrowing costs continued to rise – leaving Rachel Reeves “on the verge” of breaking her self-imposed fiscal rules, economists warn.

It comes as UK 10-year borrowing costs rose to their highest level since the financial crisis of 2008. It’s thought the Chancellor could be forced into further tax rises or cuts to spending plans.

State borrowing costs hit their highest level for almost 17 years on Wednesday as a sell-off continues in the bond market and ongoing investor concerns over the threat of stagflation, PA reports.

The rise in the cost of servicing government debts could cut into Labour’s expected financial headroom in a potentially worrying sign of how investors see fiscal sustainability in the UK.

This contributed to Sterling dropping by as much as 1.1% to $1.233 against the US dollar on Wednesday.

The yield on the benchmark 10-year UK gilt, which reflects the cost of government borrowing, climbed by roughly 12 basis points to a peak of 4.81%.

After the autumn Budget, Reeves was left with only £9.9 billion of headroom to meet her revised fiscal rules. This came despite a £40 billion package of tax increases to fuel higher spending.

Higher debt interest costs may mean the Chancellor would need to trim spending plans or bring in more revenue than expected to meet the fiscal rules.

Kallum Pickering, chief economist at brokerage Peel Hunt, said: “If bond yields rise further, Reeves may be forced to make the economically damaging decision of further increasing taxes or cutting back on planned public spending to balance the books.”

The Chancellor committed last year to having only one fiscal tax-changing event a year.

On Wednesday, the Prime Minister’s official spokesperson said: “I’m obviously not going to get ahead… it’s up to the OBR (Office for Budget Responsibility) to make their forecasts and they’ll make their forecasts at the spring statement in the usual way.

“But I would say when the Government came into office, we made very clear why it’s so important to manage the public finances to deal with the £22 billion black hole that was in the public finances, because having stability in the public finances is precursor to having economic stability and economic growth.”

A Treasury spokesperson told The Telegraph: “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.”

Conservatives are the natural party of business. On the other hand, Labour won’t ever understand what they need, or how to support them. People may have forgotten that in the fourteen years Labour has been out of office. But the last 14 weeks have shown the deep blue water between us in how we treat business. Small businesses provide vital goods and services. The business owners that run them are hardworking risk takers, creating value and serving consumers.

Together, they employ more people than the largest businesses in the country. The most helpful thing Government can do for them is to get out of their way.

Between 2010 and 2024 one million more businesses were created, and with them four million more jobs. That’s not to say we got everything right. We didn’t. But Labour seems to be deliberately focused on unpicking all that good work. Labour’s Jobs Tax will cost jobs, suppress salaries and shutter small businesses. It is obvious from the lack of any business experience in the Cabinet that they don’t understand what business needs, but this tax rise is especially destructive. It’s even worse given Sir Keir specifically committed to not increasing this very tax when he was after your vote. This is only the tip of the iceberg. Many family businesses will fall into inheritance tax for the first time and Labour’s employment rights bill is also set to drown businesses in red tape – costing the economy £4.5 billion by their own estimates. Small businesses, already on tight margins, are now facing a triple whammy of taxes from an increasingly hostile government.

Taking it all into account, this is a full frontal assault on private enterprise. No wonder there is a growing outcry from businesses about Labour’s approach to the economy – even from those who publicly supported Labour before the election. It is not surprising that such a Left-wing government would take this ideological approach. It’s just amazing they’ve managed to do so much damage already. We should take the time to support our local shops this Small Business Saturday. They need it more than ever before. Sadly, this is the start – not the end – of Labour’s war on small businesses.

The exodus of companies from the London Stock Exchange due to takeovers has reached the highest level in 14 years, in a major blow to Keir Starmer‘s government.

Forty-five firms have dropped their listings in the Capital so far this year because of mergers or acquisitions, according to figures compiled by Bloomberg, as concerns persist that economic conditions are putting off investment.

With the UK economy apparently on the brink, this year has seen a number of major deals, with the sale of video game company Keywords Studios to private equity company EQT, the sale of Virgin Money to Nationwide, and Thoma Bravo’s aquisition of cybersecurity leader Darktrace, according to The Telegraph.

The coming months are expected to bring further sales, including Carlsberg’s purchase of Britvic, and Czech billionaire Daniel Kretinsky’s bid to aquire IDS, the owner of Royal Mail.

Meanwhile, mining giant Rio Tinto, one the biggest firms on the exchange, is coming under pressure to de-list, with activist investor Palliser Capital telling the firm that its Anglo-Australian structure had cost shareholders £39.5bn.

The multi-strategy investment firm has called for an independent review of the arrangement to be launched.

It comes as business leaders and analysts have criticised the UK’s trading environment, with concerns about Britain’s ability to match other major economies.

Nikolay Storonsky, chief executive of fintech firm Revolut recently branded London listing as “not rational”, in an appearance on the 20CV podcast.

Storonsky cited the 0.5% stamp duty tax on trading as a factor, as he questioned how the UK measures up to the US.

This summer, Wealth Club, an investment platform for affluent and sophisticated investors, released its inaugural “British Wealth Report”.

It found that 55% of high-net-worth individuals feel the country does not support wealth creation or creators, while 42% consider the country an unattractive place to set up a business, as per Business Matters.

Meanwhile, 31% said they were more inclined to leave the UK for financial reasons compared to a year ago, in a major blow to Keir Starmer and Rachel Reeves.

Nicholas Hyett, Investment Manager at the investment service, said at the time: “The UK has an image problem. Wealthy investors view the country as an unappealing place to start a business, citing a culture unsupportive of wealth creators and burdensome taxation.

“These individuals are crucial to the UK economy. The top 100 earners contribute an average of £46 million in tax each, while the highest-earning 100,000 cover a quarter of the total income tax and capital gains tax bill, despite representing just 0.3% of UK taxpayers.

“This data, obtained via a Freedom of Information request to HMRC in November 2023, underscores the importance of changing this group’s perception of the UK.”

Last week, a Treasury spokesperson said in an statement to City Am that Chancellor’s “top priority is growth and making the UK the most attractive place to invest”.

“UK capital markets have raised more equity capital in 2024 than the next three European exchanges combined, and recent reforms to Listings Rules will make us an even more attractive destination for exciting businesses,” they added.

A Treasury spokesperson said: “Growth and driving more investment in the UK is our number one mission.

“Recent IPOs and listing announcements by high-growth companies like Raspberry Pi and Canal+ demonstrate confidence in our capital markets and there is more we can do to attract exciting businesses to the UK.

“That’s why we are creating pension megafunds to unlock billions of pounds of potential investment for businesses, as well as backing the largest overhaul of UK listings rules in decades.”

Express.co.uk has approached Rio Tinto for comment.

According to a recent study, small and medium-sized enterprise (SME) owners and decision-makers are attributing the Labour government’s new budget as the reason for their reduced Christmas celebrations this year.

Despite being considered one of the highlights of the working year, smaller businesses plan to reduce their festive activities by 10%.

Over half of SMEs believe that holiday festivities play a crucial role in enhancing team spirit. However, decision-makers indicate they will have to make cutbacks this year.

The average SME plans to allocate just £1,353 for their end-of-year celebrations in 2025, equating to £108 per employee.

Previous festivities have included live bands and Michelin-starred dining, but this year despite being determined to host a successful event 37% are opting for a meal out and 28% are planning drinks only.

However, the budget isn’t the only factor applying pressure; increased supplier costs (41%), lower demand for services (36%), and high taxes (33%) have also prompted businesses to identify areas where they can reduce expenses.

Other factors include rent increases (30%), winter fuel bills (28%), and having more employees to pay for (26%).

But what 53 % of SME’s didn’t know is that they can claim back £150 per head in tax for their festivities. A spokesperson for business account company, ANNA, who conducted the survey said: ‘”It’s claimable at the end of your company’s financial year, when you do your accounts and file them with HMRC.”

“First step is keeping all your receipts for party expenses, and keeping track of what you are spending per employee to ensure you make the most of this party perk, without over spending – or it becomes taxable.”

“It’s a fun time of year but Christmas parties can be very expensive, and when that’s paired with a tough trading year, it’s no wonder plans are being scaled back,” they added.

“But we hope that Christmas parties are a chance for companies to have some fun – whether it’s a lavish affair or drinks in the office.”

“It’s a real shame that so few businesses know they can claim £150 tax free per employee for seasonal parties – which would at least go some way towards making Christmas planning more achievable.”