Jeremy Huntโs emergency measures to calm financial markets โwill only work temporarilyโ as Liz Truss faces a leadership battle, which will trigger more uncertainty, warns the CEO of one of the worldโs largest independent financial advisory organisations.
The warning from Nigel Green of deVere Group, which has $12bn under advisement, comes as the UKโs fourth chancellor in four months reversed on Monday almost all of the Prime Ministerโs flagship economic policies set out in the mini-Budget less than a month ago.
He said, “Jeremy Hunt has ripped up almost every policy on which Liz Truss was elected just weeks ago to lead the Conservative Party and become Prime Minister.
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โAmongst other things, he has dropped the plan to cut the basic rate of income tax from 20% to 19% and has torn up the governmentโs two-year energy bill freeze.
โHe says his measures, along with the previous decision not to cut corporation tax and the reversal of the abolition of the 45p top rate of tax, will raise ยฃ32bn per year.โ
The deVere CEO added, โMarkets appear reassured for now. The pound gained and gilt yields dropped as the new chancellor set out his emergency measures aimed at stabilising the extremely choppy waters of the last couple of weeks.
โHowever, we expect that the new measures to calm financial markets will only work temporarily.
โThe massive loss of credibility cannot be regained all that rapidly. U-turns and abandoning landmark economic policy after economic policy does not inspire investor confidence and trust.
โRather it smacks of humiliating economic incompetence.
โNow investors are sensing that Liz Truss faces a leadership challenge within days as her own colleagues, who are worried about losing their seats, plot how to remove the Prime Minister and replace her with another senior Tory.
โThe Prime Minister is on course to be the UKโs shortest-serving leader in history โ and this all creates further uncertainty which will be translated into heightened market volatility.โ
Nigel Green concludes: โDespite Jeremy Huntโs emergency intervention – which basically means the ripping up of the mini budget – investors sense that the recent enormous turmoil in financial markets has been inflicted by the government and was utterly avoidable.
โAlthough a safer pair of hands is now in charge at the Treasury, I suspect that brewing political chaos and heightening uncertainty around Liz Trussโs leadership will again trigger market jitters.โ
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