Since our last Market Update the economic picture has markedly dimmed. A spectre of stagflation haunts the economy with growth lacklustre and inflation persistent. Extra spending announced in the October budget has pushed up the inflation forecasts and as a result slowed the pace of interest rates cuts. The cost of government borrowing has increased as markets grow nervous about the UK’s growth potential. The government may need to announce more taxes or less spending simply to stay within its fiscal rules. A third option exists. Reform to unleash growth.
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