Closing post
Time to recap…
The pound has fallen and the price of UK government borrowing rose today as investors worry over how the Labour government plans to cover its fiscal shortfall in the upcoming budget.
It was all in reaction to news that chancellor Rachel Reeves was backtracking on plans to hike income tax rates, in what would have resulted in breaking the party’s manifesto pledge.
However, with just two weeks to go until the 26 November fiscal event, it has left investors scratching their heads over how the chancellor plans to raise funds in order to cover policies like increased defence spending or the likely scrapping of the two-child benefit cap.
Meanwhile, the FTSE 100 not only suffered from those domestic jitters, but also global fears over an AI tech bubble, which continue to drag on US stocks on Wall Street.
Investors are also worried that the Federal Reserve will hold off cutting interest rates in December, and the impact of delayed data on rate decisions, following the US government shutdown.
Prolonged uncertainty around fiscal policy is causing decision paralysis at UK business, consultancy firm AlixPartners has warned:
Taxation has become the UK’s own tariff, undermining business with the same unpredictability as any trade barrier.
But headlines fixating on tax rates miss the deeper issue.
The real damage for companies comes from prolonged uncertainty and speculation that paralyse strategic planning and investment decisions.
CEOs are pushed into behaving like currency speculators, making high stakes calls on shifting ground. And recent history shows that each budget provides fleeting clarity before the cycle begins again.
