British Prime Minister Liz Truss Kwasi Kwarteng on Friday, replacing him with former foreign minister Jeremy Hunt, and scrapped part of her big unfunded tax cut plans.
Kwasi Kwarteng on Friday, replacing him with former foreign minister Jeremy Hunt, and scrapped part of her big unfunded tax cut plans.Britain would retain a plan to increase corporation tax and said her government needed to act now to reassure markets about its fiscal discipline.Register now for FREE unlimited access to Reuters.comSterling hit a record low and British government bonds, or gilts, went into freefall, after the government released its "mini-budget" on Sept. 23.
“It may have, temporarily, been an incentive for businesses to overlook the tangle of red tape and additional costs associated with trading in a post Brexit world. But at what cost? Companies had already priced in the new tax rates which had been well signposted and at 25% the UK will still be competitive.""It continues to leave a very large question mark over how tenable her position is.
I would expect gilts and the pound to remain under pressure going forward, which does keep the door open to the prospect at least that the Bank of England may ultimately be forced to continue its intervention or at the very least kick the prospect of quantitative tightening into the long grass, maybe that's the more likely outcome.""Today the main story is that there is going to be a U-turn, and there is the acknowledgement by the government that they have to change course.
Whilst expectation of the latest developments has driven a recent recovery in UK bond prices and sterling, both remain weaker than only a few months ago, implying significant extra inflation and financing costs for UK businesses and consumers.
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