After hitting the highest level this century on Tuesday, the cost of long term UK government borrowing has now hit a fresh 27-year high.

The interest rate demanded by investors on the state’s long-dated borrowing (30-year bonds) rose to just below 5.75%, surpassing the 5.72% peak reached on Tuesday, pushing it to a high not seen since May 1998.

It comes as the government auctioned off these long-term loans on Tuesday and was forced to pay a premium to do so.

Issuing bonds is a routine way states raise money.

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As well as meaning the state has to pay more to borrow money, high interest rates on debt can signify reduced investor confidence in the ability of the UK to pay back these loans.

As the trading session continued, the interest rates on long-term government bonds, known as gilt yields, fell back to just above 5.66%, not enough to erase two days of rises.

The benchmark for state borrowing costs, the interest rate on 10-year bonds, also saw rises. The yield rose above 4.8% for the first time since January, before slightly falling back

The spiked borrowing cost also continued to cause a weakening in the pound.

After an initial fall to a month-long low against the dollar, one pound again buys $1.34.

It means sterling goes less far in dollars than before the latest peak in interest rates on government bonds. On Monday, sterling could buy $1.35.

Sterling dropped to equal €1.14 before easing up to €1.15. Just a few months earlier, a pound could buy €1.19 before Donald Trump’s April country-specific tariff announcements.

So why has this happened?

Government borrowing costs have been rising across the world amid a sell-off in bonds – which prompts investors to look for a higher return to hold them.

High inflation and national debts have increased concern about whether states can pay back the money.

Japan’s long-term borrowing cost hit a record high, while the yield on the US’s benchmark 10-year bond hit the 5% mark for the first time since July.

UK bond yields tend to follow the US.

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Key to easing UK borrowing costs was the announcement of the date of the budget on Wednesday morning.

UK public finances had been a worry for markets as Chancellor Rachel Reeves struggles to stick to her fiscal rules to bring down the debt and balance the budget.

Disquiet around comparatively low growth in the UK economy also played a role.

More than a thousand high street jobs will be put at risk this week when Bodycare, the health and beauty retailer, is forced to call in administrators.

Sky News has learnt that Bodycare, which was founded on a Lancashire market stall more than half a century ago, is expected to appoint administrators from Interpath Advisory as soon as Friday.

Bodycare, which specialises in selling fragrances, toiletries, cosmetics and skincare products, employs about 1,500 people and trades from nearly 150 stores across the country.

The chain’s collapse into insolvency proceedings is likely to trigger a further effort by Interpath to find a buyer for parts of the business.

The company is owned by Baaj Capital, a family office run by Jas Singh.

Baaj, which is considered a likely candidate to buy Bodycare back from the administrators, counts In The Style among its other investments.

The firm also attempted to take over The Original Factory Shop earlier this year before its offer was trumped by Modella Capital, another specialist retail investor.

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Bodycare’s deepening crisis comes just weeks after the retailer secured a £7m debt facility to buy it short-term breathing space.

The facility was secured against Bodycare’s retail inventory, according to a statement in July.

Bodycare was established by Graham and Margaret Blackledge in Skelmersdale in 1970, and sells branded products made by the likes of L’Oreal, Nivea and Elizabeth Arden.

The chain was profitable before the pandemic, but like many retailers, lost millions of pounds in the financial years immediately after it hit.

Bodycare received financial support from the taxpayer in the form of a multimillion-pound loan issued under one of the Treasury’s pandemic funding schemes.

The chain is run by retail veteran Tony Brown, who held senior roles at BHS and Beales, the now-defunct department store groups.

Bodycare is the latest high street chain to face collapse this year, amid intensifying complaints from the industry about tax increases announced in last autumn’s Budget.

In recent weeks, River Island and Poundland both narrowly avoided administration after winning creditor approval for restructuring plans involving store closures and job losses.

Baaj has been contacted for comment, while Interpath declined to comment.

The group of Thames Water lenders aiming to rescue the company have set out plans for £20.5bn of investment to bolster performance.

The proposals, submitted to the regulator for consideration, include commitments to spending £9.4bn on sewage and water assets over the next five years, up 45% on current levels, to prevent spills and leaks respectively.

Of this, £3.9bn would go towards the worst performing sewage treatment sites following a series of fines against Thames Water, and other major operators, over substandard storm overflow systems.

It said this would be achieved at the 2025-30 bill levels already in place, so no further increases would be needed, but it continued to argue that leniency over poor performance will be needed to effect the turnaround.

The creditors have named their consortium London & Valley Water.

It effectively already owns Thames Water under the terms of a financial restructuring agreed early in the summer but Ofwat is yet to give its verdict on whether the consortium can run the company, averting the prospect of it being placed in a special administration regime.

Thames is on the brink of nationalisation because of the scale of its financial troubles, with debts above £17bn.

Without a deal the consortium, which includes investment heavyweights Elliott Management and BlackRock, would be wiped out.

Ofwat, which is to be scrapped under a shake-up of oversight, is looking at the operational plan separately to its proposed capital structure.

The latter is expected to be revealed later this month.

Sky News revealed on Monday that the consortium was to offer an additional £1bn-plus sweetener in a bid to persuade Ofwat and the government to back the rescue.

Mike McTighe, the chairman designate of London & Valley Water, said: “Over the next 10 years the investment we will channel into Thames Water’s network will make it one of the biggest infrastructure projects in the country.

“Our core focus will be on improving performance for customers, maintaining the highest standards of drinking water, reducing pollution and overcoming the many other challenges Thames Water faces.

“This turnaround has the opportunity to transform essential services for 16 million customers, clean up our waterways and rebuild public trust.”

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The government has clearly signalled its preference that a market-based solution is secured for Thames Water, though it has lined up a restructuring firm to advise on planning in the event the proposed rescue deal fails.

A major challenge for the consortium is convincing officials that it has the experience and people behind it to meet the demands of running a water company of Thames Water’s size, serving about a quarter of the country’s population.