Newton Investment Management assess the implications of the UK Budget for bond markets and the wider economy.
- The immediate priority is to provide further economic support as the country emerges from the pandemic.
- The main revenue-raising measures to reduce the deficit will be phased in later in the government’s term.
- The debt/GDP ratio is expected to keep rising, albeit more slowly than recently, until 2023/24.
- The Debt Management Office (DMO) intends to issue a minimum of £15bn in new ‘green gilts’, confirming that the state intends to play a more active role in the ‘greening up’ of the economy.
Following the example set by (among others) the US and India, the 2021 UK Budget saw Chancellor of the Exchequer Rishi Sunak confirm that financial austerity is now a fading memory for the country. Meanwhile, as widely anticipated, greater levels of state intervention were announced to help facilitate the transition to a greener economy.
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