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Hunt’s measures to calm markets ‘only temporary’

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Jeremy Hunt’s emergency measures to calm financial markets “will only work temporarily” as Prime Minister Liz Truss faces a leadership battle which will trigger more uncertainty, the CEO of a leading financial advisory and fintech has warned.

“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,” said Nigel Green of deVere Group, after the UK’s fourth chancellor in four months reversed on Monday almost all of the PM’s flagship economic policies set out in the mini-Budget less than a month ago.

“Amongst other things, he has dropped the plan to cut the basic rate of income tax from 20% to 19% and has torn up the government’s two-year energy bill freeze.

“He 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 £32 bln per year,” Green said.

The deVere CEO added that markets 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.

“However, we expect that the new measures to calm financial markets will only work temporarily,” Green warned.

Loss of credibility

“The 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. Rather it smacks of humiliating economic incompetence.”

The deVere boss said that investors sense 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 PM and replace her with another senior Tory.

“The Prime Minister is on course to be the UK’s shortest-serving leader in history – and this all creates further uncertainty which will be translated into heightened market volatility.”

Green concluded that, “despite Jeremy Hunt’s emergency intervention – which basically means ripping up the mini budget – investors sense that the recent enormous turmoil in financial markets has been inflicted by the government and was utterly avoidable.

“Although a safer pair of hands is now in charge at the Treasury, I suspect that brewing political chaos and heightening uncertainty around Liz Truss’s leadership will again trigger market jitters.”