The UK will need to borrow £3.4 billion ($4.5 billion) more than previously planned this fiscal year to cover higher debt costs and public spending, according to government bond dealers surveyed by Bloomberg.

The median of 10 estimates puts gilt issuance at £249.6 billion in the year through March, with forecasts that ranged from £243 billion to £256.2 billion. That compares with £246.2 billion announced by the Debt Management Office in April.

The higher borrowing needs reflect sharply reduced fiscal room for Andy Burnham’s new government as yields surge. UK leaders are under pressure to cushion households from rising energy bills and increase defense spending, even as higher borrowing costs leaves them less room to maneuver.

The median estimate among primary dealers is for the headroom to fall around a third to £15.2 billion, as the government partially offsets some of the decline through taxes, such as an increase in UK bank levies.

Benchmark 10-year UK yields have risen to 5.4% from 4.23% since the outbreak of the war in Iran.

That’s brought the government closer to bumping up against its main fiscal rule, which requires day-to-day spending to be covered by tax receipts by the end of the Parliament.

The updated remit will come as the government delivers its first budget under Burnham and Chancellor John Healey on Oct. 28. Even with the extra borrowing, issuance would drop from £304 billion in the 2025-26 financial year.

BNP Paribas expects the budget to stick to the fiscal rules and avoid any surprises that could unsettle “an already fragile gilt market,” strategists including Katherine Yoon wrote.

Relative to big overshoots of previous years, the extra borrowing would be moderate. In November 2025 the issuance remit was expanded by £4.6 billion. In October 2024, it ballooned by £19.2 billion.

The DMO is expected to lean more on short-dated instruments to fill the gap, issuing £11 billion Treasury bills, higher than the £5 billion forecast in April, based on the median estimate.

“We expect the DMO to make more meaningful adjustments to the maturity mix,” said Agne Stengeryte and Mark Capleton, rates strategists at Bank of America. “This would better align supply with demand.”As well as a greater use of T-bills, the DMO will tap short maturities for 42.7% of issuance, based on responses from nine dealers. It will meet 35.1% of its needs with medium-dated gilts. This compares to DMO forecasts in April for 39% of gilt sales to be short and 31% medium-dated.

Long-dated supply is expected to fall to 6.6%, according to the dealers. So far this year, there’s only been one sale of long bonds, £4.25 billion of 30-year debt on Sept. 8. At the start of the year the DMO forecast 9% of 2026-27’s gilt sales on the long end.

At 11 years, the UK government still has the longest weighted-average maturity among Group-of-Seven peers, though the DMO has been shortening it in recent years. The Bank of England has also ended sales of gilts maturing after 2049 under its quantitative-tightening program, reducing supply at the long end.