Labor has hinted at tax cuts for high earners. Photo: Carl Court/Getty Images
The Conservatives and Labor risk reigniting the debt crisis that brought down Liz Truss with reckless tax cuts or spending plans, a leading bond investor has warned.
Pictet, a Swiss bank, which manages almost £600 billion of assets, said concerns about stability in Britain had not gone away and markets would quickly punish financial recklessness.
Cesar Perez Ruiz, the company's chief investment officer, warned the Labor Party not to start inflating expenses if she wins the election. He also warned Rishi Sunak against introducing unacceptable tax cuts in his bid to stay in 10th place.
Pictet will avoid buying government debt and pounds amid concerns about a general election later this year.
Mr Perez Ruiz said: “If Labor come in and start spending money they don't have, there will be lynch mobs bonds will come back here again. So yes, I'm concerned.»
He said he was equally concerned about the run-up to the election, warning that «if Sunak is to have any chance, he may be overspending ahead of the election.» .
Mr. Perez Ruiz said, “That’s true.” why do we have a negative attitude towards pigs? We're also negative on the pound.»
Picte bought British bonds, known as gilts, in October as it became clear interest rates were likely to peak.
In the past few months, the Labor Party has sought to project a cautious, pro-business image, with shadow chancellor Rachel Reeves telling business elites at Davos that she favors low taxes and is relaxed about wealth.
The party has come under criticism for suggesting spending £28 billion for green investment, although there is speculation this will be relaxed or scrapped as election day approaches.
Mr Perez Ruiz said this would depend on the election result. elections “we could sell what we bought,” but chose not to specify what result such a decision would lead to.
Concerns about market turmoil have largely subsided since Mr Sunak arrived in Downing Street in 2022. He succeeds Ms Truss, who was ousted within weeks of becoming prime minister as markets panicked that her plans for massive tax cuts would trigger a surge in borrowing.
However, the UK is already preparing to borrow a record £206 billion from private investors this year, and Pictet fears any loss of discipline could bring those concerns back to the fore.
Xiao Cui, a senior economist at the firm, was concerned that Jeremy Hunt would go overboard with tax cuts in his upcoming budget.
She said: “ The biggest wildcard in our forecasts for the UK and beyond is that they are dragging their feet on this move.” from the election campaign.
«Fiscal policy remains an upside risk to our forecast ahead of a possible election later in the year.»
Mr Hunt hinted that further tax cuts were likely after announcing a £20 billion giveaway in November.
UK inflation has fallen significantly from a 41-year high of 11.1% in October 2022, but rose slightly in December to 4%.
Ms Tsui said: «If there is one country that we think needs a recession to bring inflation back under control, all other things being equal, it would be the UK, given the significant damage suffered by the historic shock of Brexit and then pandemic and the war in Ukraine.”
Data over the coming months will be critical in determining when the Bank of England can start cutting interest rates from their 16-year high.
But for the Conservative Party, which trails Labor by 27 points in the polls, the March 6 budget represents one of the last opportunities to restore its dismal ratings. The election is expected to take place in the autumn or winter.
The British economy will face weak growth in the first half of the year, followed by a “modest recovery” as election day approaches, Pictet predicts.
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Ms Qu added that Britain was facing a “textbook case of stagflation.”
Warnings about the risks fiscal policy and elections pose to Britain's prospects come from half the world's population. will go to the polls in 2024.
In the US, Joe Biden is expected to face a rematch against Donald Trump in November.
Picte warned that Mr Trump's potential return to The White House was also a major concern.
Mr Perez Ruiz said: “If Trump comes back, which is likely, and he comes with aggressive tax cuts, we could have a Liz Truss moment in the US.”< /p>
For this reason, Pictet invested only in US government debt for up to five years, he added.
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