Following yesterday evening’s news that two cabinet ministers – Javid and Sunak – were resigning their positions, investment experts share their views with us on what the appointment of Nadhim Zahawi to replace Rishi Sunak, might mean for economic policy as they comment:
Richard Carter, head of fixed interest research at Quilter Cheviot believes Zahawi will come under pressure to cut taxes commenting:
“Markets are playing close attention to the unfolding drama in British politics although arguably have bigger things on their mind with rising interest rates and the impending threat of recession. Given the rapidly changing events, it is unlikely that the new Chancellor Nadhim Zahawi will have long to put his stamp on economic policy before a leadership election is triggered.
“However, he will almost certainly come under pressure from Johnson to cut taxes in an attempt to try and boost economic growth (as well as please voters) even if that puts further strain on the public finances. The main priorities for the Chancellor should be to boost productivity in the economy, address the challenges raised by the Brexit deal and bring inflation down in conjunction with the Bank of England but an end to the Tory infighting is probably necessary first.”
Julia Rosenbloom, tax partner at Evelyn Partners, the leading integrated wealth management and professional services group created from the merger of Tilney and Smith & Williamson, highlights that “nothing is off the table” as she comments on possible changes to the tax regime by the new Chancellor:
“It’s only Nadhim Zahawi’s first full day in the job as Chancellor but he’s already commented that ‘nothing is off the table’ when it comes to possible changes to the tax regime. To help him stamp his mark as Chancellor, it’s quite possible that Zahawi may want to hold an emergency or early Budget where a different direction in tax policy could be announced.
“The government has been under pressure for some time to help families with the cost of living crisis so this is something Zahawi is likely to address in the next Budget, whenever that is held. However, we don’t know what, if any changes, the new Chancellor will make to taxes in general, such as IHT, so the need for families to take a close look at their tax planning and take professional advice has never been more important.”
Commenting on the market reaction to Rishi Sunak’s resignation as UK chancellor, Mike Owens, UK Sales Trader at Saxo Markets, said: “The resignations of senior members of Boris Johnson’s cabinet yesterday evening – including Chancellor Rishi Sunak, throw even more uncertainty towards the government and how it plans to deal with a growing list of economic problems.
“The pound continued its decline and traded at a two-year low against the dollar and has even underperformed the euro over the past three months, while the eurozone copes with its own problems thrown up by the Ukraine war and the energy price crisis.
“The Chancellor’s resignation came on the same day as the Bank of England’s latest financial stability report, which warned that the economic outlook for the UK and globally has deteriorated with concerns UK households and businesses will struggle to pay outstanding debts.
“Sterling has failed to pick up so far this year – falling 11% year-to-date against the dollar as the UK faces one of its worst threats to the economy in decades, this is just adding to rising inflation through the price of food, petrol and imported goods affecting millions.
“International forecasters have said Britain is more susceptible to a recession and persistently-high inflation than other western countries, all of whom are grappling with global energy and commodity market shocks. The Bank of England’s falling GDP projections this year have also somewhat paralysed investors with many left trying to predict the future and knocking market confidence.”