The UK faces the threat of significant long-term financial instability unless the Bank of England and the government work together on a long-term plan to calm markets, the CEO of a leading financial advisory and fintech has warned.
“The bond market is in utter chaos again. This has forced the Bank of England to step in with the unusual move to spend £5 billion on index-linked securities,” Nigel Green of deVere Group said after Britain’s central bank on Tuesday pledged to buy more government bonds to try and stabilise market conditions.
This comes in addition to the £5 billion allocated for conventional gilts, Green said.
“Since the reckless ‘mini-budget’ at the end of last month, UK financial markets have been in a tailspin, reeling from the government’s controversial plans to slash taxes and increase spending in a desperate dash for growth.
“This latest dramatic selloff saw UK inflation-linked bond yields surging by record levels, forcing the Bank of England to intervene to try and restore some kind of order,” the deVere boss warned.
“We’ve now had weeks of markets being rattled – as we have seen with the turmoil in the mortgage market and the pension market, and with the plummeting pound – because there seems to be no credible long-term plan. Instead, it’s all just last-minute, reactionary moves,” Green said.
“Enough is enough. We urgently need the Bank and the government to work together on a serious plan to calm markets.
“At the moment, we still have the central bank trying to hit the brakes whilst the government is trying to hit the accelerator. The result? Chaos.”
Green has earlier warned that the UK’s and the wider global financial system could collapse if action to repair the drama unleashed in the mini-budget was not rectified as a matter of utmost urgency.
“Contagion is real, as history teaches us,” he noted.
“The current last-minute, panic mode approach that’s being taken is highly damaging to the UK’s economic prospects.”