The UK’s stock and bond markets have lost at least $500 billion in combined value since Liz Truss took over as prime minister, Bloomberg is reporting.
Investor confidence has been shattered after chancellor Kwasi Kwarteng announced the biggest package of tax cuts in 50 years on Friday, which included scrapping the top rate of income tax.
Kwarteng will meet with City investors today to discuss a package of deregulation as he contends with the massive market turmoil.
Pension funds, insurers and asset managers will be invited to discuss what is being billed as a Big Bang 2.0 – a reference to Margaret Thatcher’s 1986 policies which kicked off a massive change in the City.
Lenders were withdrawing some of their mortgages on Monday as uncertainty reigned in the wake of Mr Kwarteng’s £45 billion package of tax cuts set out on Friday.
Meanwhile, the Bank of England said it “will not hesitate” to raise interest rates to get inflation under control.
The Chancellor also said he would bring forward an announcement of a “medium-term fiscal plan” to start bringing down debt levels.
The Treasury said it would now be published on November 23, having previously been slated for the new year, and would include further details on the Government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term.
At the same time, the Office for Budget Responsibility (OBR) will publish its updated forecasts for the current calendar amid widespread criticism that there was no update when Mr Kwarteng set out his “plan for growth” last week.
At one point, it was thought that the Bank would be forced to step in with an emergency interest rate hike amid fears the pound could drop to parity with the dollar.
However, governor Andrew Bailey said the Monetary Policy Committee (MPC), which sets interest rates, would make a full assessment of the impact on inflation and the fall in sterling at its next scheduled meeting in November, and then “act accordingly”.