Rachel Reeves is to present her Budget on Wednesday (Image: Getty)
Rachel Reeves risks triggering a horror “chain reaction of events” with her Budget, an expert has warned. The Chancellor is due to present her latest plans on Wednesday, with revenue raising policies, including tax hikes, widely expected to be included. A fragile economic situation means her actions could have dire concequences, Nigel Green, the CEO of finance firm deVere, believes, as a “firm, coherent fiscal position could calm yields and re-establish credibility”. A “weaker approach”, meanwhile, “risks deeper volatility and heavier economic consequences”.
He said: “As we saw last week, gilt markets are paying closer-than-normal attention. As such, businesses, households, savers and global investors are facing a moment where the consequences of a misstep could feed through the system fast. Gilt yields act as the reference price for almost every major asset and loan class in the country.” Reports about what could be included in the Budget, including a U-turn on an income tax increase, have resulted in market volatility.
Finance expert Nigel Green (Image: Getty)
Kathleen Brooks, research director at XTB, told AJ Bell that speculation means Ms Reeves has “signalled billions of unfunded spending pledges, which the bond market is not fond of”.
Mr Green said: “The latest volatility has already tightened corporate credit conditions and pushed mortgage costs upward, illustrating how sensitive the economy is to any hint that the government might struggle to impose discipline.”
He added: “A mishandling of this high-stake Budget from Reeves would set off gilt markets’ fury and the fall out would then hit businesses, households, savers, investors, and the wider UK economy with almost immediate effect.”
The Budget is seen as a pivotal moment for Keir Starmer and Rachel Reeves (Image: Getty)
Matthew Ryan, Head of Market Strategy at Ebury, said: “There is almost unprecedented uncertainty surrounding this year’s Autumn Budget, making it an unusually important risk event for markets.
“Chancellor Reeves has a mammoth task on her hands as she attempts to convey to markets that she has a credible strategy to both boost growth and plug the hole in the public coffers.”
He added: “A perceived anti-growth budget that is tax heavy and lacking in clarity on a tangible strategy to restore fiscal equilibrium would be bearish for UK assets.
“Losses in the pound and gilts would be exacerbated by a recalibration in Bank of England policy expectations, as the MPC would likely react to an economically restrictive budget by slashing rates more aggressively.”
