Rachel Reeves’ bizarre pre-Budget speech sends FTSE 100 crashing as UK braced for tax hell
The Chancellor made an unusual pre-Budget speech this morning.
Rachel Reeves’ bizarre speech sends FTSE 100 crashing as Brits braced for tax hell (Image: Getty)
Rachel Reeves’ bizarre pre-Budget speech has sent the FTSE 100 crashing as Brits brace for a Budget of tax rises. The London blue-chip index fell 75.50 points to at 9,625.87, down by 0.99%. The FTS100 market cap is £2.272 trillion, meaning the drop wiped £22.65 billion.
In a hint that tax increases are likely at the Budget, Rachel Reeves made clear that “we will all have to contribute” to repairing the public finances, in her unusual speech from Downing Street on Tuesday.
The Chancellor said: “As I take my decisions on both tax and spend, I will do what is necessary to protect families from high inflation and interest rates, to protect our public services from a return to austerity and to ensure that the economy that we hand down to future generations is secure with debt under control. If we are to build the future of Britain together, we will all have to contribute to that effort.”
The Chancellor made an unusual pre-Budget speech this morning. (Image: Getty)
She added: “Each of us must do our bit for the security of our country and the brightness of its future.”
The FTSE 100 logged its third consecutive decline today, weighed down by losses among heavyweight constituents and mining stocks.
According to a round-up on Trading Economics, Rolls-Royce, Shell and HSBC fell between 1% and 1.5%, while miners Rio Tinto, Antofagasta and Anglo American slipped around 1.5%, 3% and 2.5%, respectively.
Rachel Winter, Partner at Killik & Co, said: “UK equities are in negative territory following the Chancellor’s speech, suggesting a lack of confidence in the prospects of the UK economy.
“A higher tax burden will mean less discretionary spending and therefore less growth. The FTSE 100, FTSE 250, and FTSE Small Cap indices are all in the red this morning. While the FTSE 100 is predominantly focused on large international companies, the FTSE 250 and FTSE Small Cap are more domestically focused and are therefore better barometers for the UK economy.”
The British pound also fell toward $1.310 – its weakest level since April, after Rachel Reeves’ speech. It also comes as investors patiently await the Bank of England’s next interest rate meeting on Thursday.
An expert at Trading Economics said: “Markets now see about a one-in-three chance of a 25-basis-point rate cut this week, up from near zero after softer inflation and other weak economic data, while odds of a cut by December have risen to two-in-three.”
They added that Ms Reeves’s speech has “reinforced expectations of tighter fiscal policy, even as monetary policy may soon ease, weighing further on the pound ahead of the BoE’s closely watched rate decision.”
Ms Reeves will deliver the autumn Budget on November 26. She has declined to recommit to Labour’s manifesto commitments not to raise income tax, national insurance or VAT, saying “we will all have to contribute”.
She blamed global problems including the tariff war triggered by US President Donald Trump and domestic issues including the Office for Budget Responsibility’s (OBR) expected downgrade of economic productivity for the “hard choices” she will make.
