Is the UK Headed for Financial Disaster? Billionaire Sounds Alarm on Debt Crisis!

Billionaire Ray Dalio, founder of Bridgewater, has warned that the UK is at risk of falling into a “debt death spiral.” He says this situation is putting pressure on Labour’s Shadow Chancellor, Rachel Reeves.

Dalio explained that the UK bond market, known as gilts, has become very unstable, causing the government’s borrowing costs to rise sharply.

He criticized the Chancellor’s Budget, blaming it for making the economy weaker by increasing debt and interest payments. According to Dalio, this could create a cycle where the government has to borrow even more money to pay off its existing debt.

Speaking to the Financial Times, he said: “This looks like a debt death spiral. The government will either need to borrow more to pay off debt, cut other spending, or raise taxes.” He also pointed out that the rising costs of long-term borrowing reflect problems with supply and demand in the bond market.

Dalio explained further: “When a country has to borrow just to pay its debt and interest rates keep going up, it creates a cycle where borrowing leads to more borrowing. This is what we call a debt spiral.”

Dalio also warned former US President Donald Trump that the United States is showing similar signs of needing to borrow more to pay off existing debt, calling it the “first big issue” for the new president.

Earlier this month, the UK’s 10-year borrowing costs hit a 16-year high of 4.93%, up from 3.75% in September 2024. This increase was caused by a global bond sell-off and low confidence in the UK economy.

However, the rates dropped slightly to 4.66% on Monday. Similarly, in the US, 10-year borrowing costs also rose by 1%, reaching 4.62% in the same period.

Sir Martin Sorrell, CEO of S4 Capital, agreed with Dalio’s concerns. Speaking to the Daily Mail, he said that business leaders’ confidence in Labour had “seriously deteriorated.

He explained that before the election, Labour had tried to win business support but has struggled to keep that confidence since taking power.

Sorrell added, “The Budget felt incomplete. We’ve had tax increases, but where is the plan for economic growth?”

In response, a Treasury spokesperson emphasized that the government remains committed to strong financial management and cutting wasteful spending. They assured the public that tough decisions on spending are being made as part of an ongoing spending review.