"Financial markets, not ministers, will determine whether the upcoming Budget succeeds or fails. Politicians can frame decisions however they wish, but gilt traders will deliver the definitive verdict in real time. The next week will, therefore, hinge on a simple reality: credibility is assessed in yield movements, not speeches, and the response from the bond market will set the tone for the entire economy long after the political commentary dies down."
"Last week's gilt sell-off provided a clear warning. A single session of uncertainty sent 10-year yields sharply higher and forced investors to rethink the UK's risk profile across equities, credit and mortgages. The speed of that adjustment reveals the environment the Chancellor now faces. Markets are alert, liquidity is patchier than usual, and tolerance for missteps has diminished. Once confidence wavers, the repricing comes quickly."
"This matters because the Budget lands after months of political turbulence that has weakened trust in the government's fiscal discipline. Before the election, the Chancellor positioned Labour as a champion of business. This commitment collapsed within weeks when the first Budget imposed around £40bn in new taxes on companies struggling with higher costs and softer demand. The decision raised questions about the government's long-term framework for growth and competitiveness."
Financial markets will decide whether the upcoming Budget succeeds by judging fiscal credibility through yield movements rather than political rhetoric. A recent gilt sell-off sent 10-year yields sharply higher and forced investors to re-evaluate the UK's risk across equities, credit and mortgages. Markets are alert, liquidity is patchier than usual, and tolerance for missteps is low, so repricing can occur quickly. Months of political turbulence have weakened trust in fiscal discipline. Early post-election decisions, including around £40bn in new company taxes and a broad Employment Rights Bill, have heightened business concerns about growth, competitiveness and hiring amid rising unemployment. Chaotic pre-Budget communications amplified uncertainty as businesses and households prepared for a possible major income tax change.
Read at London Business News | Londonlovesbusiness.com
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