The UK government鈥檚 humiliating U-turn on the higher tax rate reforms will not be enough to calm turbulent financial markets, warns the CEO of one of the world鈥檚 largest financial advisory, asset management and fintech organisations.
The warning from Nigel Green of deVere Group comes as it is reported that the Chancellor, Kwasi Kwarteng, plans to bring forward his medium-term fiscal plan announcement to this month.
The deVere CEO says: 鈥淢r Kwarteng鈥檚 bringing forward of the plan to this month rather than 23 November underscores just how badly the so-called mini budget was received by financial markets.
鈥淗aving the announcement sooner rather than later is the right thing to do, as the longer the markets wait for proof that the government鈥檚 fiscal agenda is sound, the higher the risk of turbulence.
鈥淗owever, the bringing forward of the announcement and the scrapping of plans to axe the 45p tax rate stinks of desperation.鈥�
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He continues: 鈥淭he forthcoming amendments to the reckless mini budget that we know already are unlikely to calm markets in a significant way.
鈥淪terling did regain some ground higher against the dollar and gilt yields fell on the scrapping of the 45p rate announcement, but the pound will remain under pressure and high bond yields remain of serious concern.
鈥淚nvestors鈥� trust in UK plc has had a hole blown through it.鈥�
Last week, Nigel Green noted that markets now know where the weakness lies. He added: 鈥淚f they don鈥檛 budge, they will have blown up the UK mortgage market, UK pensions, amongst others, and eventually this could spread to impact the wider global financial markets which themselves are sitting on thin ice as liquidity disappears.鈥�
鈥淧rime Minister Liz Truss and her Chancellor Kwasi Kwarteng have created a loop of doom.
He concludes: 鈥淭here will be some relief that the UK government finally seems to be listening somewhat.
鈥淗owever, the modified plans do not go nearly far enough to ease markets and regain economic trust and confidence.鈥�
