Britain is facing a fresh financial challenge after the government moved to borrow at its highest cost in decades, with long-term gilt yields remaining around levels not seen since the late 1990s.

A new sale of 30-year government bonds is expected to carry a yield of around 5.83%, marking the highest borrowing cost for a UK gilt sale since the Debt Management Office was established in 1998.

Higher government borrowing costs could put additional pressure on public finances and the October 28 Budget, as more expensive debt servicing leaves the government with less room for additional spending. The UK’s 10-year gilt yield has also risen sharply amid the global bond-market sell-off.

The increase comes amid concerns about inflation, energy prices, global financial markets and government debt. Bank of England Governor Andrew Bailey has previously highlighted weak productivity, ageing populations and higher defence spending as longer-term pressures on government borrowing costs.

For households and businesses, sustained higher government bond yields can also feed into borrowing costs across the wider economy, including mortgages and corporate finance.