Financial markets nervous as initial calm and confidence eroded - Daily Focus

Financial markets nervous as initial calm and confidence eroded

1 min read

Markets got the jitters after an initial calm response to the chancellor’s announcements while she was speaking in the Commons.

Analysts had drawn comparisons with the disastrous Liz Truss mini-budget two years ago which spooked the markets with unfunded tax cuts.

Predictions of a calm response were followed by a fair amount of praise for preparation work done in the City by the new government.

But as investors took stock of the budget as a whole confidence started to erode with an upturn in the cost of government borrowing and Sterling weaker across the board.

And mid afternoon there was a reversal in initial improvements in the gilt market.

Rachel Reeves announced significant increases in government borrowing for the rest of the decade compared to forecasts in the last Conservative budget in March.

And while growth will show a faster than expected rise this year and next year, it is forecast to be weaker than previously expected growth in the next few years:

  • GDP in 2024: +1.1%, up from 0.8% growth forecast at the March budget
  • GDP in 2025: +2%, up from 1.9% growth forecast at the March budget
  • GDP in 2026: +1.8%, down from 2.0% growth forecast at the March budget
  • GDP in 2027: +1.5%, down from 1.8% growth forecast at the March budget
  • GDP in 2028: +1.5% down from 1.7% growth forecast at the March budget
  • GDP in 2029: +1.6%, a new forecast

Commentators voiced some concerns.

Economist Paul Johnson, Director of the Institute of Fiscal Studies, posted on X: “The timings of additional spending are astounding. £64 bn more next year than planned. Rises only by another £10bn over following four years. Two risks: (1) can this scale of increase be spent well that fast? (2) is it really credible then to slow growth to such a crawl?”

Andy Jackson

Senior journalist and PR professional with just under 40 years’ experience. Andy’s investigated for and written for every national newspaper, many magazines and most broadcasters. He’s also handled strategic PR, crisis management and media relations for major NHS and private sector organisations. He grew up in Stoke-on-Trent and is an advocate for Staffordshire business. “Our county deserves Daily Focus,” he said.

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