Liz Truss makes u-turn on tax cuts and sacks Chancellor Kwasi Kwarteng – market reaction | Personal Finance | Finance
On the same day, the Government also announced corporation tax will rise from 19 percent to 25 percent next year. While Liz Truss will be hoping her drastic actions will quieten the markets – the jury is out as to whether she will be successful.
Kwasi Kwarteng was Chancellor for just 38 days before it was announced today he will be replaced by the Foreign Secretary Jeremy Hunt.
The news comes after his mini-budget sent the markets into financial turmoil and saw the pound drop to its lowest level in decades.
Jason Hollands, managing director of investing platform Bestinvest, said it remains to be seen whether today’s announcements will “quell jittery markets”.
“It has been a dramatic day after a tumultuous few weeks for UK assets. “Whether these policy changes and new faces at HM Treasury will be sufficient to quell jittery markets remains to be seen.”
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Despite this uncertainty, the FTSE 100 and FTSE 250 were up today following the news.
Myron Jobson, senior personal finance analyst at Interactive Investor said: “Both the FTSE 100 and FTSE 250 are up.
“The elephant in the room following the mini-Budget was how would the tax cutting measure going to be funded after the colossal spend on Covid and cost-of-living support.
“The costing were not revealed and it was clear that significant borrowing would be required – fuelling concern over the swelling public debt after the colossal spend on Covid and cost-of-living support measures as the cost of borrowing grows.”
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He continued: “The Government will hope that reinstating the increase in corporation tax will show the markets that it is serious about balancing the books.”
The Prime Minister said her radical agenda had caused concern in the financial markets, saying her plan “went further and faster than markets were expecting”.
Jamie Hawley, Corporate & Commercial Partner at legal firm Aaron & Partners, said business leaders will be praying this announcement will at least bring something of a silver lining.
Mr Hawley said: “This latest U-turn by the Government only prolongs the chaos for UK plc and will cause further difficulty and uncertainty for businesses already struggling to stay afloat.”
He continued: “Following the mini-Budget almost a month ago, many will have started to make plans factoring in the corporation tax freeze.
“What was lauded by many as good news for businesses is quickly being eroded, complicating the situation further when economic stability has never been needed more.
“Now, business leaders will be praying this announcement will at least bring something of a silver lining – more medium and long-term certainty to the markets and the pound.
“Following the news about the Chancellor leaving his role, what we need from the Government is an end to the political uncertainty once and for all, but nervous business leaders would be forgiven for fearing what might happen next.”
