A slowdown in growth is the main risk to public debtThe reduction in the debt-to-GDP ratio would remain relatively limited. It would fall from 103% of GDP in 2027 to 97% in 2032.
Its trajectory remains heavily dependent on macroeconomic assumptions, particularly regarding growth. Rising interest rates would also weigh on debt dynamics, but their effect would be gradual and mitigated by the long maturity (13 years). Conversely, growth lower than that anticipated in our central scenario would lead to a further rise in debt.
The rise in interest rates remains gradualThe rise in interest rates is expected to have a gradual impact on the interest burden, given the long average maturity of UK debt (around 13 years).
In the short term, however, this pass-through will be accelerated by the significant proportion of inflation-indexed debt (around 23%), which directly exposes the interest burden to energy shocks.
The rise in interest rates is accompanied by a steepening of the yield curve, against a backdrop of rising term premiums and persistent public financing needs despite fiscal consolidation.
