UK borrowing costs rise and pound falls as leadership drama continues

UK borrowing costs rise and pound falls as leadership drama continuesJust nowShareSaveAdd as preferred on GoogleRachel ClunBusiness reporterEPAUK government borrowing costs have risen and the pound has fallen as the battle for the Labour leadership took another twist with Andy Burnham's decision to fight a by-election.While other European government borrowing costs also rose, the UK movements have been greater, which analysts said had been fuelled by market concerns that a Burnham-led government would increase borrowing.The 10-year bond yield - effectively the interest rate charged to the UK government for a 10-year loan - rose to 5.11% on Friday from 4.99% at the start of trade. The pound fell 0.3% against the dollar to $1.3371, having fallen sharply late on Thursday after Burnham's announcement.Kathleen Brooks, research director at XTB, said the falls meant the pound was 1.5% lower this week."This is a sign that Burnham is the least market-friendly of all the candidates, as Wes Streeting's resignation did not have the same negative effect on the pound," she said.Long-term borrowing costs also rose, with the yield on 30-year gilts climbing to 5.779%.Borrowing costs for other governments also rose on Friday, as worries persist about how the Iran war could push up inflation due to the surge in energy costs.However, investors consider that a government led by Burnham would be more likely to increase Britain's already high public borrowing.In an interview with the New Statesman last year, Burnham said the government had to "get beyond this thing of being in hock to the bond markets".Burnham to attempt return to Parliament - follow for live updatesBrooks said the two key factors affecting the pound and government borrowing costs were the prospect of a shift to the left in government, and the uncertainty around the current leadership turmoil."Overall, UK politics is a mess, there are already signs that foreign buyers are ditch...