UK debt 'may become harder to sell'

6 January 2014 Last updated at 00:01 GMT

Investors 'could be more reticent' on UK debt

The UK could find it harder to convince investors to buy its debt in the years ahead, the head of the office that issues the government's bonds has said.

The next couple of years could potentially be a "little more challenging" because of rising interest rates, Robert Stheeman told the BBC.

Investors may be more "reticent" to buy British debt, he suggested.

The UK's net public debt stands at £1.21 trillion, which is equivalent to 75.9% of the entire economy.

Mr Stheeman, who is chief executive of the Debt Management Office, told the BBC: "It's not so much the rate that we issue, it's more the direction and the movement of rates.

"So if you think as an investor, if you're buying debt from us ultimately and you know rates are declining, you also know that the value of your investment is rising.

"If however, you're buying debt and you think rates will rise even further in the next weeks or months afterwards, you might be a little bit less eager to put your money on the table and purchase our debt. So I think the investor base might at times be a little more reticent than perhaps it has," he said.

"However, I do believe that the market and the efficiency of the market will help us in that task."

Economic caution

Investors looking at buying UK debt will also look closely at the prospects for the UK economy.

Mr Stheeman says there is still some caution over the economic recovery, which makes his job more difficult.

"No-one believes we are out of the woods completely in terms of the whole economic situation," he said.

"I certainly don't get that message at all from the Treasury.

"To be fair, colleagues in the Treasury are very much aware of the challenges that we face here daily when we face the market."

Many economists were surprised by the strength of the UK economic recovery in 2013.

Last month the Office for Budget Responsibility (OBR) raised its forecast for 2013 growth to 1.4% from the 0.6% it had predicted in March.

This year the OBR expects growth of 2.4%.