Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

City fears Kwarteng’s tax cuts will be be anti-growth and stifle business investment

by September 28, 2022
September 28, 2022
City fears Kwarteng’s tax cuts will be be anti-growth and stifle business investment

City insiders have warned that tax cuts designed to stimulate economic growth might have the opposite effect.

Bankers, bond traders and economists that Business Matters has spoken to cast doubt on the government policy that was announced on Friday.

The Chancellor and Prime Minister’s guiding star has been that if you put more money in the pockets of consumers and companies the economy should grow.

Tax cuts should therefore produce stronger economic growth.

However, the opposite might be true in this case, with the tax cuts making economic growth harder to achieve, the City of London insiders said.

The unexpectedly large £45bn cut to existing and proposed tax rates has put even more pressure on the Bank of England to raise interest rates faster than was previously contemplated.

Markets were expecting baseline interest rates set by the Bank to rise from 2.25% now to 4% next year. Since Friday’s not-so-mini-budget, the bank rate is now expected to hit nearly 6% in May of next year.

Companies don’t get to borrow at that rate, they pay extra on top, for the perceived risk they won’t be able to pay it back.

For example, Marks and Spencer would have to pay 10% or more if it was to borrow for 5 years in the market today.

Very few companies are going to borrow to invest in their business – build a factory, hire more people, expand research and development – at rates that high.

In fact, they are likely to try and reduce the debt they already have by not renewing loans as they come to the end of their term – reducing their spending and investment power.

As one bond trader put it: “The additional risk now associated with the UK specifically means UK companies will be charged an extra premium for their borrowing compared to last week, which runs counter to the government’s growth agenda.”

It may be that the markets will settle down, take a closer look at the government’s other reforms and cuts to regulation promised in the coming weeks and months, and decide the government’s plan for growth can work.

But, as things stand, the UK and the companies that call it home have lost some credibility in the eyes of lenders.

That increases borrowing costs by a margin that more than offsets the potential boost to the incomes of consumers and businesses of cuts to current income and proposed corporation tax rates.

“Two steps forward – three steps back” said another bond expert. No wonder they are sometime called bond vigilantes.

Trussonomics has had a bruising first encounter with them.

Read more:
City fears Kwarteng’s tax cuts will be be anti-growth and stifle business investment

0
FacebookTwitterGoogle +Pinterest
previous post
IMF openly criticises UK government tax plans
next post
Royal Mail workers to hold 19 days of strike action

You may also like

UK space sector outpaces economy as M&A activity...

November 27, 2024

The Comprehensive Checklist for Maintaining Compliance and Avoiding...

March 6, 2024

The Best Technologies To Help You Make Your...

September 15, 2022

Why So Many Entrepreneurs Are Turning to Video...

April 1, 2025

Majority of Britons back increased tax on online...

October 14, 2024

The Costs of Bitcoin Wallets: Are They Free?

July 17, 2023

Recession to last until the summer

October 17, 2022

London Tech Week makes history as 11 year...

June 15, 2023

The rise of AI-fuelled data centres set to...

September 23, 2024

UK inflation eases to 9.9% but remains close...

September 14, 2022

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Google Digital Garage and AND Digital partner to deliver AI training for UK SMEs

      August 5, 2025
    • More than 50 private schools close as Labour’s VAT policy hits sector

      August 5, 2025
    • British spending on EU VAT-free shopping soars fivefold as UK policy faces backlash

      August 5, 2025
    • Ukraine’s Anti-Corruption Architecture at a Crossroads: What Street Protests Are Really Saying

      August 5, 2025
    • Jack’s Burgers in Southwold Crowned Best Burger in Suffolk After 3-Month Local Taste Test

      August 5, 2025
    • DOJ launching grand jury investigation into Russiagate conspiracy allegations: sources

      August 4, 2025

    Categories

    • Business (8,666)
    • Investing (2,171)
    • Politics (16,298)
    • Stocks (3,228)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved