London’s FTSE 100 closed down 2.0%, while the FTSE 250 fell 2.0% on Friday thanks to investor fears over a £200 billion tax cuts package unveiled by new Chancellor Kwasi Kwarteng – which also saw the Pound in freefall.
The package was designed by Kwarteng and Prime Minister Liz Truss to inspire growth, with sweeping tax cuts and £72 billion of extra spending – but saw the Pound falling below $1.10 for the first time in almost four decades and gilts seeing record falls.
Juan Perez, director of trading at Monex USA said, “The UK budget proposals do not reflect the need and the realities of the UK economy, one that likely requires corporations to pay more so that higher revenue can come into the government.
“A lot of the growth in the UK could come from further debt at a time of deep recessionary pressures and the market is reacting swiftly.”
The package included abolishing a planned rise in corporation tax on businesses to 25% from its current level of 19%. The Institute for Fiscal Studies think tank warned that the budget would put Britain’s debt on an ‘unsustainable’ path.
Chancellor Kwasi Kwarteng also scrapped caps on bankers’ bonuses as part of a drive to boost London’s competitiveness as a financial capital.
British business news today
Kwarteng has shaken investor confidence in the UK (FT)
Kwasi Kwarteng’s tax cluster bomb risks blowing up Britain’s credibility (Telegraph)
Hard-hit shoppers will take shine off ‘golden quarter’, retailers warned (Times)