Jeremy Hunt’s Emergency Statement: Our Chief Economist’s view

However, the Chancellor’s U-turn could still prove insufficient to appease investors going forward. Especially, as the statement did not include the burning issue of financial sector regulation, which could prove very contentious with Europe. The final terms and conditions of Brexit will play a pivotal role in reducing volatility and removing Britain from the eye of the storm. 

It will take time and patience for the damage to the UK’s reputation to be undone; but it is far from impossible. 

Meanwhile, global bond markets remain dislocated, and the UK firmly in the sights of so-called ‘bond vigilantes’, who have, historically, exerted a lot of pressure on governments and central banks.   

In the past, the solution has come through general elections, technocratic governments etc. 

Having said that, we believe that the UK is in a much stronger position than other countries. It has much lower debt, a broader economy and a great track record in keeping spending from getting out of control. For lack of a better word, it has ‘street credibility’, accumulated investor goodwill. There is damage for sure, but if British governments exhibit prudence and willingness to reconcile with their largest trading partners, we think that this damage can be reversed.

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