Here’s how much Liz Truss’s mini-budget is still costing the UK in 2026
Key Points
- Allianz Research estimates political fragility has added EUR 41bn, about £35bn, to UK interest costs since QE ended in 2022 — the largest total in Europe.
- The premium equals roughly 2.8% of annual debt service over the maturity of the UK's debt.
- The September 2022 mini-budget moved UK yields 63bps against 14bps for Italy and -2bps for Germany.
- UK risk premia showed little sensitivity to politics before 2022, including through the Brexit referendum.
- The UK scores lowest of eight countries on political fragility yet pays the highest bill, which Allianz attributes to its majoritarian system.
A new report by Allianz Research puts the UK’s political-risk premium at €41 billion in extra interest since 2022, the largest bill of any European country it measured.
The estimate appears in The price of political fragility in Europe, published on 23 July by Ludovic Subran, Chief Investment Officer and Chief Economist at Allianz, with Senior Investment Strategist Patrick Krizan and Research Assistant Pierpaolo Fiore.
At current exchange rates the figure converts to roughly £35 billion, and it represents about 2.8% of additional debt service costs per year over the maturity of the UK’s debt.
A very costly budget
Allianz dates the shift to the mini-budget of 23 September 2022, and calls the UK the cleanest example of how politics can lead to real world costs in its example.
Around £45 billion of unfunded tax cuts met a fragile mandate, the 30-year gilt yield climbed roughly 120bps in three days, and a forced-selling loop in liability-driven pension funds pushed some schemes close to collapse before the Bank of England intervened with emergency long-gilt purchases.
Measuring the four weeks after the event against the eight-week average before it, the UK moved 63bps on yield. Italy moved 14bps, Austria 10bps and Belgium 1bp. Spain was flat, the Netherlands and France each fell 1bp, and Germany fell 2bps.
Allianz shows the UK on yield rather than asset-swap spread because the SONIA swap dislocated more than the gilt, compressing the gilt-swap measure.
Before that week, UK risk premiums showed little sensitivity to political fragility. The report notes that even the Brexit referendum and the protracted EU exit negotiations left little discernible mark.
Since 2022, a one-standard-deviation rise in Allianz’s Political Fragility Index adds 24bps to the UK premium.
Why the UK is still paying
Most sovereign debt carries a fixed rate, so the premium locks into coupons at issuance and the Treasury pays it until maturity.
Allianz applies the premium to the debt as it rolls over across a maturity structure with an average residual life of seven to 14 years, which means the cost feeds into the interest bill gradually as maturing debt gets refinanced rather than repricing the whole stock at once.
The report describes the effect as a one-way ratchet. Once political fragility enters the pricing, it stays in the equation even after the trigger fades.
Despite this, the UK scores 31 on the fragility index, the lowest of the eight countries Allianz tracks.
The Netherlands sits top on 57, followed by Belgium on 55, France on 54, Italy on 49, Austria on 41, Spain on 39 and Germany on 36. Despite that ranking, the Dutch premium moves -3bps per standard deviation of fragility.
Allianz attributes the gap to institutional design. A centralised majoritarian system such as the UK or France concentrates power and can rewrite the budget on one election result, while a consensus system disperses it across coalitions, chambers and courts.
A rise in fragility adds around 31bps to the premium in the two majoritarian systems.
Across the five countries carrying a bill, the total reaches €98 billion, or an average 3.3% of annual debt service. Italy accounts for €30 billion and 4.9%, Spain €14 billion and 4.5%, France €11 billion and 2.3%, and Belgium €3 billion and 2.0%. Germany, the Netherlands and Austria show no structural fragility premium, though Allianz estimates one would add 1% to 2% to their annual interest expenditure.
