This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.bbc.co.uk/news/business-63278821

The article has changed 14 times. There is an RSS feed of changes available.

Version 1 Version 2
Pound moves higher after mini-budget U-turns Pound rises as chancellor moves to reassure markets
(about 1 hour later)
The pound has moved higher after the UK government made a series of U-turns as it abandoned tax cutting policies announced in last month's mini-budget. The pound rose on Monday following the news that Chancellor Jeremy Hunt is to make a statement later, fast-tracking tax and spending measures in an attempt to reassure the markets.
Sterling gained around 0.9% to trade above $1.12 in Monday trading. Sterling gained 1% to trade around $1.13 in morning trading.
Later today, Chancellor Jeremy Hunt is to fast-track many billions of pounds worth of tax and spending measures. On Friday, Prime Minister Liz Truss sacked Kwasi Kwarteng as Chancellor and said the mini-budget "went further and faster than markets were expecting".
On Friday, Prime Minister Liz Truss sacked Kwasi Kwarteng as chancellor and said the mini-budget "went further and faster than markets were expecting". The mini-budget was blamed for causing turmoil in the financial markets.
The mini-budget announced by Mr Kwarteng on 23 September had been blamed for causing turmoil in the financial markets. The pound slumped to a record low of $1.03 and UK government bond prices also fell sharply. The pound slumped to a record low of $1.03 and UK government bond prices also fell sharply in the wake of Mr Kwarteng's announcements on 23 September.
The UK government bond market is due to reopen at 08:00 BST (07:00 GMT). It will be the first time since the Bank of England ended its emergency support on Friday. The UK government bond market is due to reopen at 08:00 BST (07:00 GMT). It will be the first time since the Bank of England ended its emergency support programme on Friday.
The shift in the government's economic policies and market turmoil in recent weeks has led to Goldman Sachs downgrading the UK's economic growth.
The investment bank revised its 2023 UK economic output forecast from a 0.4% drop to a 1% contraction.
Goldman said it expected a "more significant recession in the UK" in part due to "significantly tighter financial conditions" and the planned higher corporation tax rate from next April.
Chancellor to fast track tax and spending measuresChancellor to fast track tax and spending measures
Truss still in charge despite U-turns, says HuntTruss still in charge despite U-turns, says Hunt
Meanwhile, analysts at the EY Item Club said "high energy prices, elevated inflation, rising interest rates and global economic weakness" meant the UK economy was "expected to be in recession until the middle of 2023". "The chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability," a Treasury spokesman said.
A recession is defined by the economy shrinking for two three-month periods - or quarters - in a row. It is the latest of a series of U-turns on policies announced in the mini-budget.
However, EY said the risk of a severe downturn had been reduced by the government's energy bills support for households and businesses, meaning that it will not be as bad as previous recessions. The announcement of the £18bn U-turn on corporation tax on Friday and the firing of Mr Kwarteng did not appear to reassure investors, with UK government borrowing costs climbing on Friday afternoon.
The economic forecasting group has significantly downgraded its previous summer forecast which estimated the economy would grow by 1% in 2023. Investors warned that whatever Mr Hunt announces will need to "add up".
"There's no doubt the UK economy faces a difficult period ahead, with global headwinds adding to domestic pressures," said Hywel Ball, EY UK chair. "I think you'll see a positive reaction to the statement, assuming that the math adds up a bit more than it did before," Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC.
"The silver lining is that the government's intervention on energy bills is expected to limit the extent of the downturn, while ONS data suggests that households have access to a larger cushion of pandemic savings than previously thought." "What we saw on Friday, was we had markets rise in in the lead up to the news the news that Kwarteng was resigning, but then as soon as it happened, we had a sell off afterwards.
The EY Item Club said it expects inflation to peak at just below 11% in October, lower than previous predictions because of the government's intervention on energy bills. Currently, inflation is running at 9.9%. "So I think it'll be important that the actual content of what's being delivered adds up and has some more meat and numbers behind it than what we've seen previously."
EY warned average annual inflation is still expected to outpace annual average wage increases until 2024, with household real incomes likely to decline over the next 12 months to the greatest extent since the 1970s. The Bank of England stepped in to stabilise the financial markets following the mini-budget, announcing an emergency bond-buying scheme.
Ms Kelemen said that the latest moves from the chancellor showed he acknowledged the government's role in reassuring the markets.
"They've recognised that the uncertainty is damaging the economy," she said.
"You also see the Bank of England won't be supporting markets this week. So I think it shows the government is taking a bit more responsibility rather than relying on the Bank of England to buy all the debt."
The shift in the government's economic policies and market turmoil in recent weeks has led to Goldman Sachs downgrading its forecasts for UK economic growth.
The investment bank revised its 2023 UK economic output forecast from a 0.4% drop to a 1% contraction.
Goldman said it expected a "more significant recession in the UK" in part due to "significantly tighter financial conditions" and the planned higher corporation tax rate from next April.
Consultancy Pantheon Macroeconomics said the prime minister's decision to appoint Mr Hunt as chancellor had "done little to shrink the risk premium embedded in UK assets".Consultancy Pantheon Macroeconomics said the prime minister's decision to appoint Mr Hunt as chancellor had "done little to shrink the risk premium embedded in UK assets".
"Households and businesses, therefore, are still facing a huge increase in their borrowing costs," analysts said. "Households and businesses, therefore, are still facing a huge increase in their borrowing costs," their analysts said.
They added the forthcoming real-terms reduction in government spending looked "set to be bigger than in the 2010s".They added the forthcoming real-terms reduction in government spending looked "set to be bigger than in the 2010s".
You may also be interested in:You may also be interested in:
WATCH: Jeremy Hunt - Hard decisions aheadWATCH: Jeremy Hunt - Hard decisions ahead
WATCH: Jeremy Hunt - Hard decisions aheadWATCH: Jeremy Hunt - Hard decisions ahead