Britain will be plunged deeper into recession by Liz Truss’s corporate tax U-turn and turmoil in the mini-budget market, economists have warned, as the City braces for more wild swings in the pound and bonds.
Forecasters have warned that the UK’s economic downturn will continue into next year as new Chancellor Jeremy Hunt vowed to restore investor confidence by scrapping Mrs Truss’ radical economic plans.
Goldman Sachs cut its growth forecasts for the UK due to “significantly” worse credit conditions and Mrs Truss on Friday abandoned plans to reverse next April’s rise in corporation tax from 19% to 25%.
5 things to start your day with
1) Jeremy Hunt’s Herculean Treasury negotiates plugging £62bn debt black hole: New chancellor gets to work as economists predict growth could ‘change the picture for the better’
2) Rail ticket office staff to be moved to station platforms as kiosks close: Closing ticket offices will save taxpayers around £500m a year, industry sources claim
3) City hiring falls by a third as banks brace for crisis: Economic turmoil spells end of deal boom
4) The luxury dollar blows a hole in Liz Truss’s defense plans: The PM promised to spend 3% of GDP on the military, but now the economy is in tatters
5) Labor is the only party with a credible growth plan, Tesco boss says: John Allen’s comments signal worsening relationship between Tories and big business
What happened in one night
Asian stock markets were lower on Monday after another blow to Wall Street as investors braced for a further sharp tightening of global financial conditions, with all the recession risks that entails.
Concerns about financial stability added to the corrosive mix with all eyes on UK bonds after the Bank of England’s (BoE) emergency buying came to an end.
Sterling was up 0.6% at $1.1233, but trading was thin with little liquidity in Asia. FTSE futures fell 0.5% and EUROSTOXX 50 futures fell 0.6%.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2 percent and returned to a 2-1/2-year low last week.
Japan’s Nikkei lost 1.5% and South Korea’s lost 0.1%. Chinese blue chips fell 0.6% ahead of GDP data expected on Tuesday.
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