UK Debt Held by Foreign Investors

One of the most common questions is, who owns UK National Debt?

Often  people assume that that it is owned by foreign investors. However, foreign investors only own about a quarter of UK debt. The rest is owned by the private sector (pension funds, insurance companies e.t.c). Recently, the Bank of England has also been purchasing Gilts under the Asset Purchase Scheme.

However, in past few years, the proportion of debt held by oversees has risen to nearly 30%

Graph Showing UK Debt Held By Overseas Investors

Source: UK DMO

Does it matter if Debt is held by overseas investors?

• If oversees investors felt that the Pound was going to significantly devalue, then they would probably want to sell gilts on the open market. This would mean bond yields would rise making it more difficult and expensive to finance UK debt.
• If oversees investors felt that UK could default, then similarly they would want to sell gilts. This widespread selling by oversees investors would reduce value of sterling.
• It is not necessarily a bad thing, if overseas investors hold UK debt. In a global economy, investment banks, insurance firms want to diversify. UK banks / investment trusts will hold gilts / bonds in other countries; they wouldn’t just buy UK bonds.
• What this does show is the importance of reassuring foreign investors about the state of the UK economy and value of the Pound. Otherwise, it would be a problem financing UK debt from domestic private savings.