Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, said the rise in borrowing costs “has effectively eviscerated Reeves’ fiscal headroom, threatening to derail Labour’s investment promises and potentially necessitate a painful re-calibration of spending plans.”

Globally, there has been a rise in the cost of government borrowing in recent months sparked by investor concerns that US President-elect Donald Trump’s plans to impose new tariffs on goods entering the US from Canada, Mexico and China would push up inflation.

The prospect of those policies is colliding with separate concerns about growing US debt and persistent inflation, which could also keep borrowing costs high. In the US, interest rates on 10-year government bonds also surged on Wednesday, before dropping back at mid-day to more than 4.7%, still the highest level since April.

Danni Hewson, head of financial analysis at AJ Bell, said the UK rises were similar to those in the US.

“US Treasury 10-year yields have jumped to the highest level since April, whilst in the UK 10-year borrowing costs have soared to their highest levels since the financial crisis,” she said.

Adding: “It may be a global sell-off, but it creates a singular headache for the UK chancellor looking to spend more on public services without raising taxes again or breaking her self-imposed fiscal rules.”

Ms Hewson said that with less than two weeks before Donald Trump returns to the Oval Office, “uncertainty about his tariff plans are already rattling investor nerves.”

The official forecaster, the Office for Budget Responsibility (OBR), will start the process of updating its forecast on government borrowing next month to be presented to parliament in late March.